Sole trader Goodwill

Sole trader Goodwill

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Recently took over a new sole trader client.   Has been in business for over 20 years, started business from nothing (did not take over an existing business).

His Balance Sheet shows Goodwill of £20,000.   When I look back at the last 4 years accounts the Goodwill has been a constant value & not amortised.   Client can't provide any insight into this, previous accountant retired & totally unco-operative.

The client doesn't want to be Ltd - happy to stay a sole trader (accepts he may save tax by being Ltd - but simply not interested).

Should I start amortising this over say 5 years & eventually remove from the Balance Sheet?

Goodwill is not my strong point!   For a sole trader I'm thinking this amortisation is not tax allowable?

Any help appreciated.

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By andrew.hyde
13th Jan 2014 14:59

You're right

The amortisation is not allowable for a sole trader or partnership (companies have different rules).  So from a taxation angle it really doesn't matter what you do with the goodwill, as long as you adjust it correctly in the tax computation. 

If the accounts are just for the proprietor, once again you can do more or less what you want as long as you explain it to him or her. If they are liable to be used by a third party, such as a bank, that might put a different complexion on things.

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By kbraccountancy
14th Jan 2014 02:09

Is it really Goodwill?

Goodwill would normally arise if a business was purchased above its book value. As there was no purchase of a business, I am not sure how this could have arisen?

I would check if this maybe other intangibles such as software that was not accounted for correctly.

If it is intangibles you would be able to do more with it from a tax angle than with 'goodwill'

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