Readers’ forum: Sale of practice that may involve fraud

A sole practitioner accountant is selling his practice and has received an offer that he is minded to accept. I have pointed out that there appears to be a lack of clarity as to the tax treatment of the purchase price. And the deal may even involve an unintended attempt to fraudulently mislead HMRC.

The practice agent who sourced the purchaser is adamant that the arrangements are very common. The heads of terms are clear that the practice is being sold for 1.1 times gross recurring fees. This much seems fine. 70% of the fee will be paid on completion and 30% after one year (subject to clawback if fees fall in the interim).

On this basis the full fee would be treated as a capital receipt and the sole practitioner would be subject to capital gains tax in the usual way. Equally the larger firm that is buying his...