Help - Transfer / Selling of assets from LTD to Private Individual(s)

[bbe]

Hi All,

Hope you might be able to help as I'm not too hot on accounting!

My family and I set up a Ltd company and purchased an asset (>£100K - directors loan) for the sole purpose of the business. We are VAT registered and claimed back the VAT on purchase of the asset. Two years down the line we've concluded that finding business is far harder than we forecast and therefore wish to cease trading (and have the company struck-off).

We've decided however that we (the three directors / shareholders) would like to transfer/buy the asset from the company, understanding that VAT will probably now be due (I imagine on the value of the asset at point of sale?).

Is it possible to transfer this asset to the ownership of one (or all) of the directors/shareholders by just paying the VAT due on it (rather than temporarily finding the full amount) as it was funded initally by one of us in the first place??

....I think I'm just getting in a confused muddle! Any help would be greatly appreciated!

cheers,
Chris

[David Griffiths]

Provided that the company is solvent (actually provided that all external creditors get paid, in practice) you can sell the asset to one or more of the directors/shareholders at its current market value, and account for VAT on that.

If there are still directors' loans outstanding, the asset can be transferred in (part?) settlement of those loans, so you don't have to find the full consideration in cash. The company should charge VAT on the sale price and account for it to HMRC in the normal way.

Because the transactions isn't at arm's length, there are provisions for HMRC to substitute a market value, so be prepared to defend your value in case of a future query.

If this was raised by a client I'd ask what the new owners intend to do with it?

[fathippy]

Because the transactions isn't at arm's length, there are provisions for HMRC to substitute a market value, so be prepared to defend your value in case of a future query.


This raises an interesting point, because whilst there is a market value on the machinery itself, the business as a whole may be worthless, since it does not generate any profits and is consequently being closed down. This would then mean that an offer of eg 10k for the business may be deemed acceptable. Hence this becomes a viable transaction, and yet the value of the machinery may be a lot higher.

I guess this contradiction occurs where the machinery is very specific and only changes hands by appointment - ie if something is nominally worth £50k, you wont even get a £5k bid as there is no dealership or secondary market. I suppose that HMRC take this into account when looking at the market value, but I would be a little annoyed if I couldnt raise anywhere near the number they suggested on the open market, and yet they were asking for the VAT on the higher amount.