I have a client who is converting from sole prop to pty (ltd). I have a few questions about the practical and tax implications of this conversion (I am using Pastel Xpress 14):
1) the year-end of both entities is 28 Feb. However, the pty (ltd) will only be in operation from 1 July. I assume that I will create opening balances in the pty (ltd) on July 1st and start creating invoices etc from this date? How do I treat the sole prop? Do I close it as of 30 June and treat the period from 1 March - 30 June for tax purposes as a sole prop and from 1 July as pty(ltd)? Or do I need to backdate all transactions for this period and create in the pty(ltd)?
2) The only assets are debtors and office equipment, which I will create opening balances for in the pty (ltd). Is there anything else that needs to be transferred from the sole prop?Neville suggested a way to copy all open sales order and invoice data history from the sole prop to pty (ltd) so that open invoices and sales orders are transferred for future payments matching and new invoices in the pty (ltd). This will eliminate the need to keep both sets of books open until debtors in the sole prop is zero.
3) Any suggestions for calculating a goodwill amount? The sale will be captured via a Director's Loan account in the pty (ltd) so that the Director can benefit from capital gains tax in the current tax year on the withdrawels against the loan account. Can anyone confirm if this is a suitable way of structuring the sale for tax purposes?
Any other suggestions / advice will be much appreciated.