Selling Personal / Sole Trader Assets to my own Limited Company

[Chaz]

Hi,

New to the forum, please be gentle. I have googled extensively and I believe I understand the workings on something like IT hardware or similar.

In this case, I own a sole trading company. This company trades within the engineering field and has previously sold 3D printers etc. I have recently (personally) funded a 2nd hand milling machine and spent a few thousand pounds fixing it up. Trying to determine the value of this item is difficult as it was made in 1995.

Am I able to sell this from my sole trading company (me) to my Limited Company? I own 2 limited companies, one is for my IT ventures so I wont use this however the other is fairly generic under the classification of "82990 other business support service activities not elsewhere classified".

If the milling machine is now worth say £5000 (this is based on what similar machines sell for on ebay or buying a new Chinese equivalent), could I sell this to my Limited Company for £5000 and it then becomes an asset to my limited company? My limited company trades at the same address which means I can keep using it. Currently the machine earns no money but developing parts for the market. When these are sold, it will likely be sold 'from' the limited company.

Thoughts? Options?

Thanks

[SueEllen]

Talk to your accountant.

If it's fine with them and they aren't a dodgy outfit then it should be fine with HMRC.

[Chaz]

Thanks. Will do, just wanted to get some consensus if the logic was reasonable and that it was legal before asking.

[northernladuk]

On the face of it I'd say it's ok. It's common advice for contractors to sell their laptops and phone to the company when they start up as they are tools of the trade. A lathe is your tool of the trade and one is available at market rates. The fact it is personally yours I don't really think makes a difference as you and the company are separate entities. As long as there is no piss take which you have said there isn't then the transaction looks fine.

The caveat here is we have no idea what you make, how you sell it and so on so that's your business to sort out.

[Contreras]

Thanks. Will do, just wanted to get some consensus if the logic was reasonable and that it was legal before asking.

IMHO the logic is reasonable, but open to challenge. Get an opinion from your accountant but it will also be just that.

I think you would be better to simply expense as much of the kit that you have actual receipts/invoices for.

The risk is if the commercial plans stall then you are (arguably) funding a hobby project through yourco.

[VectraMan]

Yep. What would be dodgy is paying over the odds for it, or if it wasn't "wholly and exclusively" for business use. I'd be inclined to print out EBay or other adverts and stick them in a file as justification for the price just in case anybody ever looks.

[TykeMerc]

I agree with the others the logic looks sound. The basis for a challenge would be the sale price so having evidence from a couple of sources that the price is in line or cheaper than what you could have bought the kit on the open market would be wise.
As to the "funding a hobby" comment, that's always a risk, but many people have turned their hobby into a viable business, it's an argument that's winnable if you're sensible.

[Chaz]

So I spoke to my IT Limited Company Accountant as a 'what do you think'. His view is that it is reasonable at 'fair market rate'.

The machine cost me £1900 + transport cost and I have sunk another £3ish K into it, all costs that I have receipts for so I should be able to justify the price. The sale was on ebay, so the 'value' there is very much based on what someone is willing to pay. Typically these machines go for £2500ish before they get modernised. Ive modernised mine, hence the extra spend.

My IT contract has come to a sudden unexpected stop and whilst I am hopeful I can find something quick, I may need to release cash quickly, so this is handy. Whilst it is mainly a 'hobby' thing, it could become a viable business.

[Contreras]

The machine cost me £1900 + transport cost and I have sunk another £3ish K into it, all costs that I have receipts for so I should be able to justify the price.

So why not simply expense it at cost?

Using a market value may be technically correct but reimbursement with receipts is simpler, may better stand scrutiny, and/or attract less attention in the first place (at a guess).

My IT contract has come to a sudden unexpected stop and whilst I am hopeful I can find something quick, I may need to release cash quickly, so this is handy.

Not sure I follow the logic there. If the company can afford to buy the machine from you then what's wrong with declaring a dividend, salary, or even a loan?

Whilst it is mainly a 'hobby' thing, it could become a viable business.

I think there needs to be a clear intent of business venture, e.g. supported by sales, even at a loss.

[Chaz]

So why not simply expense it at cost?

Using a market value may be technically correct but reimbursement with receipts is simpler, may better stand scrutiny, and/or attract less attention in the first place (at a guess).



Not sure I follow the logic there. If the company can afford to buy the machine from you then what's wrong with declaring a dividend, salary, or even a loan?



I think there needs to be a clear intent of business venture, e.g. supported by sales, even at a loss.

Fair enough. I dont have a receipt for the ebay purchase but I have the purchase record as it was done via ebay.

A dividend and salary will be taxed. Technically I will be unemployed from next week Thursday so just looking at ways to ensure I can feed my family until I get something else.

Perhaps a loan is an option, I dont know (hence posting and asking).

I can show intent, I have previously traded (turned over £80K a few years ago) and starting with something similar again. I can demonstrate parts made for motorcycles and where I will be selling them (will get my old ecommerce site up again).

Thanks for the input.