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What to look for if it’s time to reassess

By Ola Sulaimon

Ronzl Accountants

I CAN’T believe how 2017 has just flown by. It has surely been a very interesting year for me. I have met so many lovely people, I have tried a lot of new things – and the scariest was shooting a video.

But while we look forward to 2018 it might be a good time to reassess our businesses.

There are different ways to run our businesses. You might be a sole trader and your business has grown a lot so you are considering incorporating your business. Here we look at the process to incorporate a business to a limited liability company.

If you incorporate your business by transferring your old business and assets to the new limited company, it would be treated as if you have disposed of the business and assets for their market value. This may lead to chargeable gains which is the difference between the market value and cost.

You could qualify automatically for a relief that is called incorporation relief which is given if the business, together with all the assets except cash, is transferred to the new business.

The condition for this is that the business transferred must be a going concern transferred in exchange wholly or partly for shares in the new company.

This would just defer your tax on the gain until the future when you sell the shares.

If you would rather pay the tax now, you would have to write to HMRC to elect to pay the tax now rather than in future.

Other things to consider are:

Final Account – as the business is been incorporated it brings an end to your old business so you would have to prepare your accounts and submit to HMRC.

Compliance issues – there are greater compliance issues when you run your business through limited company.

Extraction of Funds – you would have to decide the mode by which you would extract funds from your limited company. It could be through salary or bonus, dividends, pension contributions, etc. to ensure that you are extracting the funds in a well tax-planned manner.

To find out more contact Ronzl Accountants Ltd, 51 Billing Road, Northampton. Call 01604 965826 or see the website at www.ronzlaccountants.co.uk