Ch 22- Cessation Of Unincorporated Business

Question 1

Closing year rules

Answer 1

Less overlap profits not yet relieved ( to reduce liability)

Question 2

Terminal loss relief

Answer 2

Losses made in last 12 months can be carried back against trading profit of:
-Last year, and then
-carried back 3 years on a LIFO basis.

Question 3

Loss relief on incorporation:

INCORPORATION RELIEF

Answer 3

Carry forward trading losses to incorporated company if:
-Sole trader receives at least 80% shareholding consideration
-Holds shares for at least first year
-Company carries on same trade

Question 4

Incorporation relief (What to offset against)

Answer 4

Order:
1)Employment income
2) Interest income
3) Dividends

Question 5

CGT on cessation of unincorporated business

Answer 5

-Rollover relief= Gain deferred to cover reinvestment in new assets after disposal of old assets.

-Incorporation relief (as seen)

-Gift holdover relief- Giving away assets If sole trader, partner or 5% voting rights in co, or unlisted shares, CGT to be deferred until sale from giftee.

-Business asset disposal relief= If holds 5% share in co, upon disposal of assets or shares, 10% tax on gains payable up to £1,000,000. Above this, payable 10%/20%

-EIS/SEIS reinvestment relief= 30% IT reduced up to £1m EIS. 50% IT reduced up to £100k SEIS

-Capital losses- CY, PY, FY

-Annual exempt amount - £12,300

Question 6

IHT- If business is gifted or transferred at undervalue:

Answer 6

-Depending on recipient, transfer could be exempt, PET or CLT
-BPR may be available to reduce IHT liability

Question 7

VAT- Admin on transfer to incorporated company

Answer 7

May be easier for admin to just change name and entity rather than resetting up a new account.