Readers' forum: Hanging in the balance

I have a problem that still seems to cause differences of opinion. It concerns capital allowances on incorporation. If I have a pool balance of say £20 000 but the assets in that pool are worth £30 000 what happens on the transfer of a business from a sole trader to a company? Instinctively this feels that it ought to be a market value transaction but I understand that an election can be made for a transfer at tax written-down value. But I have seen it suggested that if the assets were sold for £1 a balancing charge of £19 999 would be created. The company would then be entitled to a negligible allowance but this is more than compensated for by a balancing allowance of nearly £20 000 at marginal income tax rates for the individual.

Is this correct and is there...