Sale of business

cassie · Postby **cassie** » Tue Mar 18, 2003 5:53 am

My husband is currently operating as a sole trader. I help out in the business but do not receive any salary or income from it.

He is in the process of selling the business and hopes to complete in May.

If on 6th April my husband and I sign a Partnership agreement, can we then claim both of our capital gains allowances against the price of the business, provided we split the income from the business during April and May as well (I have a relatively high income from my job, so any other income would be taxed at 40%).

Any tips on how to deal with this would be much appreciated.

cassie

Nigel Lord · Postby **Nigel Lord** » Tue Mar 18, 2003 6:01 am

Cassie

It would be relatively simple to arrange for you to benefit from your annual CGT exemption and lower rate bands. However, action should be taken well in advance of the sale of the business and professional advice should be taken to ensure that the transfer was legally valid and tax effective.

It would certainly be sensible to take a profit share, and this may have a been sensible tax planning in the past.

My firm specailises in this area of taxation and would be pleased to act on your behalf.

Nigel Lord
Lord Associates
Caxton House
Old Station Road
Loughton
Essex IG10 4PE
020 8508 1642 & 07769 931852
lordassociates@ntlworld.com

demetris · Postby **demetris** » Tue Mar 18, 2003 6:08 am

The IR might challenge the partnership arrangement under settlement provisions. This means that it may assess the whole of capital gain on your husband on the grounds that the partnership creation was a tax evasion scheme.

To be able to give proper advice and try to do some planning, I need more info.

demetris savva BA FCCA
http://www.tax-accounting-london.info
constantinesavva@accamail.com

cassie · Postby **cassie** » Tue Mar 18, 2003 10:29 am

Thanks both for your replies, they are much appreciated.

Nigel, your comment "It would certainly be sensible to take a profit share, and this may have a been sensible tax planning in the past. " made me realise I may not have been clear in my original post. I earn more than my husband - he is a lower-rate tax payer and I (through my full-time job) am a higher-rate tax payer.

Which leads me to think that if we become "partners", the best solution would be for my husband to "draw a salary" and then for us to split the remaining profits (which would be minimal).

Does that make sense?

cassie

Nigel Lord · Postby **Nigel Lord** » Wed Mar 19, 2003 2:35 am

Cassie

Your latest suggestion probably works. If you genuinely do work in the business, you could become a partner and enjoy a profit share. You do not need to use the 'salary route' if you target the profit share appropriately.

I recommend that you become a partner reasonably well in advance of the sale.

Remember that you will pay CGT at your marginal rate of income tax which if higher than your husband's may not result in a reduction of CGT.

Please contact me if you require any detailed advice.

Nigel Lord
020 8508 1642
lordassociates@ntlworld.com