Hi all,
As ER is no longer available on goodwill I was wondering how you approach businesses that want to incorporate but have very little physical assets, or where the MV of those assets is very close to cost.
Consider a barbershop with a MV of £125k. If they had £10k worth of assets (cost ~ £10k) then the goodwill would be £115k. With no ER the gain chargeable to CGT would be £115k less the annual exemption, taxed at 28% - a huge cost to bear for the owner in the following January.
The alternative I can see if gift reliefing the goodwill. Of course this reduces the cost to business but I understand you can no longer get tax deduction on amortisation of new goodwill anyway. It also means that the cost base of the shares to the owner is whatever he actually pays for them (e.g. nominal £1) for future sale/ no tax extraction advantage of a large directors loan account.
I think I need to work the figures of losing the benefit of selling the goodwill at MV to the company in return of a loan note. i.e. CGT at 28% vs the personal tax cost of extracting the value using dividends and corporate tax.
Look forward to your suggestions and hoping I haven't missed anything obvious...