The application of para 57 of the 8th Schedule on the sale of a CC’s assets plus goodwill
09 March 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: A close
corporation sold assets and goodwill to the purchaser. The members of the close
corporation have retired subsequent to the sale. The question is, does
paragraph 57 of the Eighth schedule apply where close corporation can disregard
up to R 1 800 000 of capital gain or do the members qualify for the R 1 800 000
A: Provided that
the requirements of para 57(2) have been met, does one then have to consider
whether the asset disposed of would qualify as an "active business asset”.
The term "asset” is defined in Part 1 of the 8th Schedule
and includes property of whatever nature, whether moveable or immovable,
corporeal or incorporeal but excluding any currency (excludes coins made mainly
from gold or platinum), and a right or interest of whatever nature to or in
It is my
understanding that the goodwill being sold would fall within the definition of
"active business asset” and your client may therefore well qualify for relief
in terms of para 57 as the asset (goodwill) was used or held wholly and
exclusively for business purposes.
I think that you have to familiarise yourself with para 57
to ensure that all other requirements have been met.
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.