Transfer of sole trader to Ltd Company

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shaxxa
shaxxa Registered Posts: 82 Regular contributor ⭐
in General accounting discussion
Hello,

I am hoping that some of the more experienced MIP's may be able to help please?


My client has now incorporated and this is my understanding of how this process should be dealt with:

We have agreed to make an election of transfer of assets at the WDV and this value will be transferred to the directors loan account on incorporation.
Entrepreneurs relief will be claimed on the goodwill against CGT.

My question is how do I deal with stock, cash at bank and Creditors (there are no debtors).


Should there still be a balance sheet in the sole traders accounts?

I've never dealt with this scenario before and whilst I'm confident with the taxation, it's how to declare this in the accounts?

Many thanks in advance.

Sharon

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  • KernowAccountant
    KernowAccountant Registered Posts: 103 Epic contributor 🐘
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    shaxxa said:

    Hello,

    I am hoping that some of the more experienced MIP's may be able to help please?


    My client has now incorporated and this is my understanding of how this process should be dealt with:

    We have agreed to make an election of transfer of assets at the WDV and this value will be transferred to the directors loan account on incorporation.
    Entrepreneurs relief will be claimed on the goodwill against CGT.

    My question is how do I deal with stock, cash at bank and Creditors (there are no debtors).


    Should there still be a balance sheet in the sole traders accounts?

    I've never dealt with this scenario before and whilst I'm confident with the taxation, it's how to declare this in the accounts?

    Many thanks in advance.

    Sharon

    Thought I would pick up on a couple of quick points:

    1) I note you're making a s.266 election, which applies for TAX purposes. I wouldn't (necessarily) use the same value for accounting purposes as it may not be in the interests of the client (nor correct).

    2) As you're "confident" with the taxation, you'll no doubt be aware of s.177 and the potential of a s.178 claim when "dealing" with stock (assuming it was transferred on incorporation - otherwise s.172B may be in point).

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