Transfer Fixed assets from Sole Trader to Company

Discussion in 'Askaboutbusiness' started by jfp, Jun 6, 2008.

  1. jfp

    jfp Guest

    I have changed the legal status of my business from a sole trader operation to a limited company. I will be seeking professional advice on this question but will post here also.

    As a sole trader I had fixed assets with the capital allowances only partly used so far. Can I transfer these fixed assets over to the company with no exchange of money and just place them on the books of the company. Would the company be liable for CGT on recieving these assest free of charge as such?

    Would I be able to continue getting the capital allowances through the company even though no money was paid by the company itself for these?

    If this was not a viable option could I sell the equipment to the company invoicing them? I believe not tax would be payable then as it is just sale of fixed assets to a seperate legal entity.

    Any feedback welcome.
  2. jfp

    jfp Guest

  3. MandaC

    MandaC Frequent Poster

    Have you set up a separate limited company?

    The limited company can acquire the whole or any part of the assets, goodwill and trade(the undertaking) etc from the Sole Trader. The consideration can be the allotment of shares in the limited company to the sole trader.

    There are various steps and minutes/etc involved, including amending the objects of the Limited company to acquire the business from the sole trader.

    Its fairly detailed and totally depends on your own set of circumstances and professional advice is a must.
  4. jfp

    jfp Guest

    The limited company is setup already. The sole trader business and the company are two seperate entities. The company has no ties with the sole trader business other than the fact that I am owner of both.

    The sole trader business has not been acquired by the company as such the sole trader has just ceased business and the company has started. The only connection between the two will be the fixed assets transfer.
  5. MandaC

    MandaC Frequent Poster

    you would need your professional advisor/accountant to go into specifics(schedule of assets) company secretarial paperwork, etc.)
  6. ButtermilkJa

    ButtermilkJa Frequent Poster

    I spoke to my accountant about this before. I can't remember the exact answer, but as far as I recall it is a simple enough process. You would value the assets and then purchase them off the sole trader (i.e. yourself) at that price.

    I'm not sure exactly what happens with regards the capital allowances. I would imagine, due to the fact that the two entities are separate, that you could claim the remainder of the allowances in your final accounts as a sole trader and then start new 8 year allowances with the Ltd Co. as technically speaking they are new assets for the company, albeit being second-hand items.

    For example...

    Asset bought by Sole Trader in Jan 2006 for €1,000
    €125 claimed by Sole Trader as capital allowance in 2006
    €125 claimed by Sole Trader as capital allowance in 2007
    Item sold to Ltd Co. for €750 in Jan 2008
    €750 claimed by Sole Trader as remainder of capital allowances
    €93.75 claimed by Ltd Co. as capital allowance in 2008

    Bear in mind that as a Sole Trader you have now earned an extra €750 and will need to account for this in your final accounts.

    Obviously there will be the relevant paperwork to be completed also.
  7. KDA man

    KDA man Frequent Poster

    Value the assets and bring them into the company in the form of a directors loan to the business. You can then draw this money out of the company as and when you want. There is no tax exposure.