Tax relief and goodwill

Goodwill is usually defined as the ‘extra’ value attributable to a business over and above its tangible assets.

In the vast majority of cases, when a business is sold a significant proportion of the sale price will be for this type of intangible asset: the goodwill of the company. This places a monetary value on the business’s reputation and customer relationships, or as HMRC say in their guidance, in accounting terms, purchased goodwill is the balancing figure between the purchase price of a business and the net value of the assets acquired. Valuing goodwill is complex and there are many different methods which can be used and that vary from industry to industry.

The tax treatment of goodwill has changed in recent years. Until July 2015, a company which bought goodwill and certain other customer related intangible assets could claim corporation tax relief for the payment. This was done by writing off the cost of the goodwill over a period of years, otherwise known as ‘amortising’ the goodwill.

Planning note:

From 8 July 2015, no corporation tax deduction is available for the cost of purchased goodwill.

If you are looking at purchasing or selling a business we would be happy to advise you on the issues relating to the acquisition or sale. We can also help you structure the deal to maximise any available tax reliefs still available.

Posted in Corporation Tax

Exeter Accountant M J Smith

Celebrating 25 years of excellence.

Free 1st Meeting
Fixed Fees
Free Support!

Find out more

Exeter Accountant News

Bereavement leave for parents who lose a child

The Parental Bereavement (Leave and Pay) Bill has been published by the government. Although the Bill is a Private Members’ ...
Read More

Managing staff experiencing mental ill health

Acas has launched new guidance to help employers manage staff who are experiencing mental health issues. The new guidance aims ...
Read More

What is a ‘K’ tax code?

The letters in an employee’s tax code signify their entitlement (or not) to the annual tax free personal allowance. The ...
Read More
 

Newsletter

With our newsletter, you automatically receive our latest news by e-mail and get access to the archive including advanced search options!

Sign up for the newsletter

Login

Twitter Feed