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Post Info TOPIC: Incorporation


Guru

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Posts: 658
Date:
Incorporation


Morning all

My brain is feeling very befuddled this morning so thought I would post on here hopefully for some confirmation on the following situation.

I have a sole trader client who wishes to incorporate the business, only assets are two vans that he owns that have previously had AIA claimed on the purchase so that the WDV is nil, am I correct in thinking that if a CA2001 s.266 election was made by both parties then the vans would be transferred into the Ltd Company at the WDV of nil meaning no balancing charges for the Sole Trader.

Hopefully that is the tax treatment taken care of, now with the accounting treatment my thoughts are that the two vans would be transferred at Market Value into the Ltd with the amount being a debit to FA and a credit to the DLA.

Hopefully someone could confirm if my treatment is correct or if not show me the error of my ways, or does anyone have a more beneficial way of making the transactions.

Cheers



__________________

Doug

These are only my opinions of how I see things and therefore should not be taken as advice



Master Book-keeper

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Posts: 7201
Date:

Hi Doug
Hoping someone else will pitch in on this one as working today due to upcoming madhouse meetings week.

One option - incorporation relief. Worth a dig if you haven't already.

Otherwise perhaps an election as you say. Some interesting reading on here, albeit it's 3years old. HTTPS://www.taxation.co.uk/articles/2015/07/14/333370/asset-incorporation




__________________

Joanne

Winner - Bookkeeper of the Year 2015, 2016 and 2017

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.



Guru

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Posts: 658
Date:

Thanks Joanne

__________________

Doug

These are only my opinions of how I see things and therefore should not be taken as advice



Master Book-keeper

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Posts: 2670
Date:

Am I right in thinking that with the election the tax the shareholder would have paid is passed to the company by way of depreciation? I've only done one in the past but it was a car rather than a van, so no AIA. Election wouldn't have benefited the client in that instance, as there was a loss to the ST

Just thinking out loud but is there any mileage (pun not intended) in renting the vehicles to the Ltd Co? The shareholder could then offset it against their personal allowance and trading allowance,



__________________

John

Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.



Guru

Status: Offline
Posts: 658
Date:

Hi John

My understanding was that because it was a transaction between connected people then no AIA would be available for the purchaser which in this case is the Ltd Co, they would only be able to claim 18% WDA every year, so with the election it means that there will be no balancing charge for the ST but also the Ltd Co would have the WDV of Nil so nothing to claim back in the way of CA.



__________________

Doug

These are only my opinions of how I see things and therefore should not be taken as advice

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