Goodwill on Incorporation

Goodwill on Incorporation

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An individual is a successful sole-trader Financial Advisor (IFA).

Current income of the business is derived roughly 50% from commissions for new work placed each year and 50% from 'run-off' commission paid by the big insurance companie etc from investments that were placed in earlier years.

IFA now wishes to incorporate his sole-trade business and capitalise goodwill in the balance sheet of the ltd company.

It's accepted that as a sole-trader, there is an element of personal goodwill here, which will cannot be capitalised on transfer to the new company.

However, the ongoing future run-off commission from investments already placed, is a saleble asset, quite distinct from the personal element of the goodwill.

The intention is therefore to place a realistc market value on the right to the future run-off commission, assign the rights to this future income to the new limited company and capitalise this as goodwill in the new company.

Does anyone have any experience of having done anything similar?
Any views on what HMRC might make of this?

P

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