Newco oldco. Group goodwill.

Newco oldco. Group goodwill.

Didn't find your answer?

Just took on a new client. There is a bit of a story , here goes.

He bought 100% of the shares in a trading company two years ago. The company turnover is £1.5m profit of c150k The company had been involved in an ebt dating back to 2005/6. He sort of knew about this but wasn't concerned as too much time had passed. The departing shareholder was upfront and my guy took a punt. He got a good price on the shares. He runs the company well and things going fine.

THEN. HMRC announces that all tax avoidance schemes will be issued with APN. The tax at stake on the EBT IS £900k. And the company could never afford that. He seeks advice from insolvency practitioner. He is advised to create a new company and move the trade from old co to new co. The trade is valued and a business transfer agreement was signed to confirm that newco bought goodwill/trade for the market value.

The other thing is that his shares in oldco were transferred to newco in return for new shares in newco, so a group was formed. No tax clearances were obtained for the share for share but I suppose CGT is the least of the problems.

What about the goodwill being bought by newco? Is this recognised in the accounts of newco? It is acquired for consideration albeit from a group company.

Replies (1)

Please login or register to join the discussion.

Portia profile image
By Portia Nina Levin
24th Apr 2015 15:46

(No subject)

Thanks (0)