Need some help to set this up correctly in the accounts.
Started a new Company and it was agreed to buy out another Company (the other Company would continue to trade but not for the part of the business we purchased).
The amount for the business represents the goodwill - correct?
Stock - there was an opening stock value agreed, however, insufficient funds were available so we agreed to buy stock some months later (after peak Xmas period).
How should this be done in the journals - is the previous Company the supplier of the goods for general stock? There would be no VAT as the stock has already had VAT accounted for.
Not enough information there, say your company is A and you are buying Company B. Are you buying stock only, share in company B or both? Is company B related to company A at all? Generally good will is considered at incorporation from non ltd business or valued based on several methods considering business as a whole, in your case you mentioned Co. B would continue to trade. We need more info please
Essentially we bought the trading name / contacts / systems / payment systems over and the stock at valuation. The Company B was Limited and we set up a new Company A, but trading using the same website domain / tradename.
The main issue is how to treat the stock as the whole value was not purchased at the time of the initial purchase. Hope this gives you more - thanks for taking an interest!
There wont be any goodwill as such because you bought bits and pieces which you need to record in your books based on their materiality either as P&L items or capitalise in balance sheet. Stock should be normal sale of company B to A subject to vat
The whole business was effectively taken over. Also the stock had VAT already paid for under the existing Company so would there still be a VAT amount to pay when we agreed the purchase price?
Effectively the owner of the previous business no-longer was trading;
a complete change in the persons carrying on a business in partnership
(in other words no same person or company that was in the partnership
before the change continues in the partnership after the change)
(S162(3),(4) CTA 2009 and S173(3) ITTOIA 2005),
I suggest speak to accountant of your choice as these kind of matters are very personalised from business to business, treatment of things can vary a lot based on situation e.g
- Company A bought shares in Company B
- Company A shareholders bought shares in B
- Co. B sold just tangible and intangible assets which would look like whole business but not necessary the case
Taking over existing business does have other issues like capital allowances treatments of assets in use etc.