Gordon contacted Clearways Accountants when he realised that he should no longer trade as a self-employed IT provider. His company had already been formed and he was happy to do the bookkeeping, complete the VAT Returns and run his payroll himself. Initially Gordon only wanted Clearways Accountants to prepare his company accounts, abbreviated accounts and corporation tax return.
Have you developed valuable goodwill?
When Clearways Accountants met Gordon we talked through his business and it came to light that he had a valuable customer list that had grown since 2002. We valued the customer list and on the transfer of his trade and assets to the new company we included a value for goodwill.
What did this mean?
- The price of the goodwill was left outstanding as a loan from the company to the shareholder; to be repaid as the shareholder required.
- The sale of goodwill was taxed as a capital gain although it was largely covered by the capital gains tax allowance so almost no tax was payable. In the main the transfer of a business to a company would be covered by Entrepreneurs Relief so that any gain over and above the capital gains tax allowance would be taxed at 10%.
- In addition the creation of the goodwill permitted a tax deduction based on the accounting write down, in this case over three years.
If you have been successfully trading as self-employed and you think it may be time to incorporate then contact Clearways Accountants for your free consultation to see what options you have on the transfer of your trade and assets to the company.