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Experts answer: Can my sole trader assets be transferred to my limited company?

Readers questions: My partner and I have between us around 30,000 thousand pounds worth of tools/equipment as a sole trader, can we take them over to the ltd company or can the ltd company pay for them? We don’t want money out, we would like to offset our tax bill, can it be done?

sole trader assets be transferred to my limited company

Experts answer: The expert that answers this question is Kevin Abranches from Orange Genie.

Assets can be transferred from a Sole Trader to a Limited company as long as the assets are fully utilised within the business and there is no private use.

You will need to establish the current market value for the assets. This can be done by checking the second-hand value of the assets on auction sites.

Once you have established the value of the asset, you will need to create an invoice from the company to you and your partner for this value in order to “sell” the assets to the company. The company does not need to pay for the assets immediately. The value can be treated as capital introduced and can be recorded as a loan from a director to be repaid over a period of time or paid in full at a point in the future.

The assets qualify for Annual Investment Allowance (AIA) up to a £1Million limit from 1 January 2019 to 31 December 2020. The assets can only be claimed in the period of purchase and are deducted from the company’s profits before tax. Therefore there will be a reduction in corporation tax. Note any depreciation charged on the assets will need to be added back to the taxable profits as this a non-allowable expense for corporation tax purposes.

If the assets are sold after claiming AIA the company may need to pay tax.

More on expenses you can claim through your limited company.

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