Generally in the UK, can you write off relating goodwill off against sale proceeds? Is it tax deductible?
Many thanks for answer
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Do you mean the proceeds of sale of the goodwill in question, or the proceeds of sale of something else?
Sale in question.
Company A acquired external company X for £40m, included in the sale was Tradename, content and software assets for £20m and goodwill for £20m.
A year later company A sold the assets to company B (within the group) for $40m, Assets made up of Tradename, content and software for £40m
Could Company A write off the original assets Tradename, content and software £20m and
goodwill £20m, against the £40m proceeds from company B?
many thanks
How did A acquire the assets from X and how much did it pay for them?
What makes you think that there would be any tax to pay on a sale to another group member?
Ignoring the above questions - if the company is selling assets that it paid £20m for, what makes you think that it could deduct £40m from the proceeds?
Company A purchased X for 40m including 20m assets and 20m goodwill.
If goodwill is not transferred to B, in that same there will be a gain on the sale to A - therefore tax.
If B is only buying some of the assets, not the business, can goodwill even be transfered to B? I don't think so.
The assets were acquired for 20m but then sold on for 40m - external valuation etc. The question is can the 20m goodwill be written off against the 40m from company B in company A? I.e. 20m assets and 20m goodwill.
In company B it would have a 40m asset on its Balance sheet.
Many thanks
That doesn't answer my question. You say that A purchased X. How, and for how much, were X's assets then transferred to A?
You have also to address the point about intra-group gains.
Yes A purchased the external business X for 40m, the assets of X transferred to A this being 20m of trademarks, content, customer contacts etc - the remaining 20m is goodwill in A.
One thing to note A is selling the trademarks to B & the customer contracts to C. The sale to B is an asset sale rather then a business disposal sale (therefore my understanding it and 20m goodwill cannot transfer? IAS3?) The issue is A doesn't want to have the 20m goodwill on its balance sheet and hopes it can write it off against the 40m proceeds from B.
A wants to have a £nil impact from the purchase of X and sale of its assets to B.
Hopefully that addresses your question? Many thanks
Who is company C, and why haven't you mentioned them before? For that matter, why is the business being split in this way?Yes A purchased the external business X for 40m, the assets of X transferred to A this being 20m of trademarks, content, customer contacts etc - the remaining 20m is goodwill in A.
One thing to note A is selling the trademarks to B & the customer contracts to C. The sale to B is an asset sale rather then a business disposal sale (therefore my understanding it and 20m goodwill cannot transfer? IAS3?) The issue is A doesn't want to have the 20m goodwill on its balance sheet and hopes it can write it off against the 40m proceeds from B.
A wants to have a £nil impact from the purchase of X and sale of its assets to B.
Hopefully that addresses your question? Many thanks
Not wanting something in the accounts does not mean you can simply write it off. Either the goodwill still has value somewhere, or it doesn't and you have to know why it has lost all value.
I give up. You clearly are unable to distinguish (and understand the importance of doing so) between a share sale and an asset sale.
And you have not even begin to address the point of an intra-group sale.
I suggest that you hand this to someone that knows what they are doing.
Cash purchase, sorry, all cash - no share sale.
Company policies - trademarks etc go to B, customer contracts etc company C. Not sure the exact reason, probably tax strategy.
Since company B isn't acquiring all of the business my understanding is the goodwill has to stay in company A since it's an asset sale not a business sale? (I.e customer contacts purchased by C, trademarks etc company B).
My understanding is effectively if company A is selling the assets they acquired from X then the goodwill is not worth anything? I hope my understadning is correct. Therefore can company A write off the asset proceeds from B & C (40m) against the assets valuation in their books at the point of sale (20m) and the goodwill (20m) ? in theory does that seem an acceptable approach?
Sorry for missing details out :)
Oh for heavens sake - cash has got sod all to to do with it.
I'll try and make it easy for you - what did A actually buy? Did it buy the shares in company X or did it buy assets etc directly from X? Do you understand the difference?
Do you understand what a tax group is? Are A, B and C in a tax group?
Seriously - go and speak to an accountant
My understanding is effectively if company A is selling the assets they acquired from X then the goodwill is not worth anything?
Leaving aside whether this is an accurate understanding of the effect of the transactions for the moment.
Are you saying that company A spent £40million, then deliberately took actions that, as far as they were aware, lost them £20 million of that purchase value immediately? Because that is a fairly peculiar way to do business as a rule.
With the amount of money washing around, this needs to be put into the (paid) hands of someone competent to unravel it. Ideally it should have been run by them before the initial transaction took place, of course.
Based on the plethora of information originally provided, this was only ever going to go one way.
