How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Tony Tax Your Own Question
Tony Tax
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 15901
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
Type Your UK Tax Question Here...
Tony Tax is online now
A new question is answered every 9 seconds

I have a small client. He was operating as a sole trader (no

This answer was rated:

I have a small client. He was operating as a sole trader (no staff) in the construction industry.
Last year he converted to a one-man-band limited company. There is essentially no change to his pattern of trading.
I propose to transfer all his assets from the sole trader to the limited company at book value.
I understand there will be no tax implications under TGCA 1992 ss 162 and 162a.
I could create, say, £K10 of goodwill (below the annual CGT allowance), put it in his loan account and it could then be drawn tax free at leisure.
However it may be difficult, formally, to justify this goodwill.
How would HMRC view this?


It will only be a problem if the tax office ask you to give your reasoning behind a valuation of £10,000 but that doesn't justify what could be a spurious attempt to get some tax free cash. I'm also wondering how a one man building business can have any goodwill since he is the business. Even if he had a list of regular customers, who is he going to sell the list to? I might give regular work to your client because he does a good job but if he sells my name to another builder, I won't necessarily use the new one for building work. It might be different if he has contracts with local authorities or other businesses.

You have to be able to justify a valuation of goodwill if you are asked to by the tax office.

I hope this helps but let me know if you have any further questions.

Tony Tax and other UK Tax Specialists are ready to help you

Related UK Tax Questions