Tax implications for selling a business

murphf

HI,

We have decided to sell our business (limited company) due to a change in family circumstances. Our accountant is being obnoxious, and to be honest we can't really afford to pay for a lot of legal advice, we are selling for just enough to cover the outstanding liabilities as we just want rid of it, and with a clean slate the buyer can make something of it. I have a couple of questions and would be grateful if anyone in the know can answer them.

1. We made a profit of 10,500 last year but this was the first year (of 5 trading) we made a profit, and this profit isn't really a profit, we used it to repay a personal loan we got to support the business. Do we need to pay tax of any sort on this?

2. We built a storage unit in our garden, which we got a small loan for through the business, but we have underwritten. We obviously will keep it as it is in our garden, and we will pay the rest of the loan off. Is there a tax implication for this?

3. Although we are selling the business, the money will be swallowed up in debts the business owes, so I presume we don't have to pay any tax?

4. We have put money into the business we won't now get back, is there anything we need to do about this?


Is it ok for us to fill in the forms for change of directors, and transfer of shares ourselves?
Any advice gratefully received!

Alan Shore

Well,

Ok seperate out the various issues that you have raised for a minute.

1) What are you selling a company ie shares or is the company selling the business ie its Goodwill.
The two are very different. If you are selling the shares the purchaser will want to do due diligence and may want a warrenty against liabilities which may arise in the future normally in relation to tax.
If they are just taking the business not the company then they have a fresh start and its may not be as onerous.

If you are selling the shares this sale is subject to CGT (Proceeds - cost x 25%) in your hands, if the company is selling its goodwill then the company is subject to CGT (Proceeds - cost x 25%).

2) In relation to the property, the company built on your land. Did the company recover VAT on the construction. This is essentially being transferred to you so you have a VAT liability in the company. As long as the market value of the storage unit does not exceed its construction cost then no CGT will be due.

In relation to your query on profit the company should have losses forward from the prior years which should cover the profit for last year.

Hope that helps a bit

C

Mr. Incognito

OP banned for asking for specific professional advice in breach of the charter.

Alan Shore banned for giving it when he really should know better.

You accountant has professional indemnity insurance and as such if he gives you incorrect advice- you can sue him.

Boards does not.

Thread closed.