The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
A trade and assets sale may involve the disposal of specified assets, and possibly the assumption of certain liabilities, along with a trade. The tax implications of the transaction will depend on the specific items being transferred, since there is a series of separate disposals of the various assets involved. This could involve the following:
premises such as office buildings or factories
plant or machinery
other assets held on capital account
intangible fixed assets, such as intellectual property (patents, know-how, etc) and goodwill
debtors and cash
The consideration specified in the sale and purchase agreement (SPA) will usually be for the acquisition of the business as a whole. For the purposes of calculating the tax liability of the company disposing of the assets, the consideration needs to be broken down between the various components included in the sale. The way in which it is allocated between assets is a key area for tax planning.
For a transaction between connected parties, the apportionment of consideration in the SPA will usually be acceptable but HMRC may impose a ‘just and reasonable’ basis in certain circumstances (see below).
See Simon’s Taxes D6.436 for further details.
The Checklist ― tax considerations in a corporate trade and assets sale acts as a reminder of the key tax considerations that may arise as a result of a trade and assets sale.
The disposal of stock is treated as a trading transaction and any resultant profit is subject to corporation tax. The method of stock valuation is dependant upon the relationship between the vendor and purchaser.
For unconnected party transfers, the amount apportioned to stock in the SPA is normally accepted by HMRC as the tax value and so no tax adjustment is necessary. HMRC may, however, impose a ‘just and reasonable’ basis of valuation where it considers the value has been manipulated to obtain a tax advantage.
For connected party transfers, stock is transferred at the market
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