Transferring debtors

[Alan]

I traded last year (briefly) as a sole trader. One of my customers
never paid me. I incorporated at the end of 2003 and continued chasing
the debt - and finally have been paid.

What I want to know is can I simply transfer this debt from myself to
the limited company and then consider the payment it as part of the
company income? Should the company have paid a nominal amount to
purchase this debt? Is there any additional tax considerations?

thank you for any thoughts,
Alan

 

[Doug Ramage]

I traded last year (briefly) as a sole trader. One of my customers
never paid me. I incorporated at the end of 2003 and continued chasing
the debt - and finally have been paid.

What I want to know is can I simply transfer this debt from myself to
the limited company and then consider the payment it as part of the
company income? Should the company have paid a nominal amount to
purchase this debt? Is there any additional tax considerations?

thank you for any thoughts,
Alan

There is now no debt to transfer.

I assume you wrote off this debt prior to incorporation?

 

[Peter Saxton]

I traded last year (briefly) as a sole trader. One of my customers
never paid me. I incorporated at the end of 2003 and continued chasing
the debt - and finally have been paid.

What I want to know is can I simply transfer this debt from myself to
the limited company and then consider the payment it as part of the
company income? Should the company have paid a nominal amount to
purchase this debt? Is there any additional tax considerations?

thank you for any thoughts,
Alan

You have to recognise the revenue somewhere. How did you treat the
debt in the books of the sole trader? Did you provide against it or
write it off?

Transfer it at book value, including any bad debt provision.

 

[Peter Saxton]

You have to recognise the revenue somewhere. How did you treat the
debt in the books of the sole trader? Did you provide against it or
write it off?

Transfer it at book value, including any bad debt provision.

Sorry, I missed out something relevant!

Whatever the transferred amount is then any excess received should be
posted to revenue.

 

[mjt]

I presume that, upon incorporation, you transferred *all* assets and
liabilities into the company. This would have included your trade
debtors and probably also your order book (which forms part of the
"goodwill", the excess of consideration for the fair value of the
business' net assets).

If so, the answer to your question is no. You sold your assets to the
company, along with the right to the income derived from it. So, you
can't cherrypick.

It's like selling your house, then noticing the new owners get a refund
on Council Tax based upon an incorrect revaluation, then you go back and
ask for it.... it doesn't work.