Partnership cessation

[robuk]

2 partnership business, unincorporated, decide to go there seperate ways.

1 partner wants to carry on and the other wants 40k for there share of the business

Q: What will be the tax implication on the partner receiving the 40K. The business has been trading for 4years.

Q: Can the partner still carrying on the trade claim relief against the 40k loan to pay the other partner.

[Nigel Lord]

robuk

Answers to your specific queries are as follows:

1. Assuming that the business is undertaking a trade, the recipient of the £40,000 will be liable to Capital Gains Tax (CGT) on the gain less the following deductions and reliefs:

Costs of sale (professional fees etc)

The purchase cost (probably nil)

Costs of acquisition (legal fees etc - but possibly nil)

Capital losses arising in the same tax year

Business Asset Taper Relief (75% of net gain)

Unused annual exemption((£7,900 pa)

Losses brought forward

Any chargeable gain will be taxed at their highest income tax rate(s).

2. Yes any interest paid on a loan to acquire a business asset (e.g. goodwill) will be allowable.

If you require any further assistance please do not hesitate to contact us, and we will be happy to act on your behalf.

Nigel Lord
Lord Associates
Taxation & Business Consultants
Caxton House
Old Station Road
Loughton
Essex, IG10 4PE
020 8418 9101 & 07769 931852