selling a business

kevj9201

Hi, just read a similar thread and not sure how it all works.

I have been self employed on a part time basis for a few years hiring out bouncy castles. I complete self assessment.

When i purchase castles i claim a % against my income and when i have sold them in the past i write off the remaining balance and put the sale price as income which i obviously pay tax on.

My question is this, i am thinking of stopping doing this business and was just going to sell my castles individually and pay the income tax as above, but im not sure if i sell it as a going business will i still be liable for the income tax or would it be capital gains tax?

Hope that makes sense and any advice would be greatly appreciated.

Pennywise

It's still income tax as you're not selling "your business" as a whole - you're just selling individual assets. Capital gains tax would be applicable only if you were selling a "business" including all assets, such as the goodwill and all other equipment.

ceeforcat

When i purchase castles i claim a % against my income and when i have sold them in the past i write off the remaining balance and put the sale price as income which i obviously pay tax on.

Does this mean you claimed part of the cost as an expense rather than Capital Allowances?
I would be concerned that your accounts would be incorrect for previous years. Did you do this yourself or did you have an accountant who advised this?

kevj9201

When I started I phoned hmrc and was told to claim 50% in first year and 25% of remaining for future years as expenses. I would be selling the business as a whole including everything so would this be income tax or capital gains?

ceeforcat

Well - the first year allowance of 50% disappeared in April 2008 to be replaced by the Annual Investment allowance at 100% for items under £50000. The 25% is now 20% also. However this is a business tax allowance, not expenditure and should never have had any effect on your net profit. It would be claimed after determining your taxable profit from your accounts. It would appear that you may have encountered some problems with the figures previously returned and may have paid too much tax as a result.

The answer to your other question though is that it would certainly be income tax as a result of receiving more for the castles than the value to which they had been written down to in your Capital Allowances computations.

Pennywise

ceeforcat wrote: »

The answer to your other question though is that it would certainly be income tax as a result of receiving more for the castles than the value to which they had been written down to in your Capital Allowances computations.

Agreed, it would only be any goodwill that would be taxed as a capital gain - i.e. the amount received over & above the value of the castles, i.e. for a customer list, or a google ranking for its website or whatever.