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Amortisation not previously claimed as a tax-allowable item

A colleague referred a query to me.

He's interviewed a new potential client who incorporated his sole trader business in 2008, having started up in business in 2004.

His current adviser had added back amortisation expenses on the goodwill in the company tax computations, presumably not realising it would have been tax-allowable.

The query is whether the unclaimed amortisation in 2008 and 2009 could be set off against the 2010 tax charge or whether amended returns would have needed to have been submitted.

If the set-off is possible for 2010, what would be the most appropriate way of presenting the charge on the CT600 and accompanying tax comp?

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Amend returns

It appears that the prior returns should be amended under the overpayment relief provisions (the replacement for the old Error or mistake relief).

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How is it allowable?

On what basis is own generated goodwill from a related party allowable?

If he had purchased the company from an unrelated third party and paid for goodwill, I can see that this would be allowable.

Have I missed something or is the original accountant correct?

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I have this saved as a useful link!

www.accountingweb.co.uk/anyanswers/goodwill-allowable-against-corporation-tax-when-sole-trader-converts-limited-company

Previous discussion explaining when allowable under related party rules

 

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Thanks for that - I obviously missed this at some point in the past - wont make the same mistake again!!

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