Goodwill of £1

Goodwill of £1

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When a business is sold (via an asset sale) and a value is put on property, equipment and goodwill what is the significance of only putting £1 on the goodwill. Is it for the advantage of the vendor getting a bigger balancing allowance?
Pjm

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By User deleted
31st Mar 2006 08:48

generally speaking...
...the seller wants as high a goodwill as poss if they didn't have capitalised the original goodwill.

And vice versa...

ps - I'm not an accountant.

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By AnonymousUser
31st Mar 2006 09:02

It's true..
.. that the purchaser will normally want to maximise the value of goodwill nowadays as you can amortise this for tax purposes whereas before FA 2002 you couldn't. You can of course also claim CAs on the plant and equipment so you would want to maximise both in preference to heritable property which may not qualify for any relief unless IBAs or hotel allowances are due. However, the apportionment must be 'just and reasonable' otherwise HMRC may not accept. The reason for the £1 for goodwill though may be legal i.e. doesn't there have to be a consideration for a contract to be legally binding. Otherwise you have to execute a deed or declaration of trust.

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By User deleted
28th Sep 2009 12:15

Goodwill of £1

My understanding is that goodwill is shown at £1 to recognise its existence without showing the price originally paid for it.  Goodwill on sale being the price negotiated for it at the time of sale.

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