Transferring a business to a Limited Company
Transferring from a sole-trader or partnership, to a Limited Company is sometimes recommended by accountants for tax planning reasons, or to benefit from Limited Liability, and they will consider the following issues.
Work out which side of a tax year end to transfer the business because this decision will affect taxable income (and rates) between tax years.
A Company is a separate legal entity; this needs to be reflected in all legal documents including invoices, contracts, your website and any insurance policies.
Capital Gains Tax and hold-over elections (s.162/s.165 elections):
Transfer of a business can result in Capital Gains Tax. Valuation of assets (particularly ‘goodwill’) may be necessary and ‘hold-over elections’ considered and, if necessary, submitted to HMRC in order to reduce/postpone Capital gains Tax.