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The business of a profitable residential care home, run by a sole trader, was transferred to a limited company in 2010. Unfortunately, the property could not be transferred until 2012
Our client ran a highly successful residential care home as a sole trader until 31 March 2010 when he incorporated.
The business was making annual profits in excess of £500k pa before his drawings but after paying a salary for a professional manager.
On incorporation it was not possible to sell the care home building to the company because there was a substantial six-figure debt on it which could not be renegotiated due to the UK banking crisis.
Goodwill was valued at £1m on incorporation and our client self assessed the capital gain in his 2009/10 tax return claiming entrepreneurs’ relief.
The banking situation was finally resolved in July 2012 and the building will be sold to the company for £2.5m in September 2012 (£500k bank loan £2m director’s loan) and entrepreneurs’ relief will be claimed as an ‘associated disposal’ within three years of the cessation...
