Corporation Tax relief on Goodwill write off

My Client owns 21% of an LLP. He is selling part of this holding to a Limited Company (which he has 100% control over), so the transaction is 'not at arms length'.

The Partnership share comes with rights to a guarenteed monthly drawing of £7,000 and the asset is valued at £200,000.

 

My Client is of the opinion, that he can write down the value of the intangible investment over 25 years, or even less. He has had advice from a financial advisor suggesting that the income received from the monthly drawing can be offset against the write down cost of the investment , thus no CT.

I have told him this advice is incorrect, as Intangible Asset w/downs are not allowable under CA relief. He has suggested that under CTA2009 (S728 onwards) there is the provision for obtaining tax relief on such write downs.

I have suggested that at best this relief would offer 4% per annum relief and this could not be justified as transaction not at arms length and there is no finite end to the monthly fee payment so there is little arguement to devalue the asset.

Even if all this wasn't relavent, the relief (at 4%) would only equate to £8k which would not put a dent in the £84,000 minimum income a year from the investment.

 

Unfortunately this is one of those Client's who reads a bit of information regarding Tax legislation, finds a bit that justifies his actions then will not budge from this position. If I am missing something I would appreciate a steer.

 

Thx

 

 

Comments
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Depends on when goodwill was created

cfield |
cfield's picture

A few things spring to mind

George Attazder |
George Attazder's picture