Have any Aweb user enjoyed success at all in agreeing a value for sole trader goodwill on incorporation. I know that HMRC tend to assert that they are all worthless, but wondered if anyone has overcome this.
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Not sure that's quite correct
"HMRC tend to assert that they are all worthless"
HMRC may question whether any goodwill was actually transferred if John Smith window cleaners incorprates his business. HMRC will argue that John has not disposed of his personal goodwill. He could go back to operating as a sole trader using his given name at any time. On the other hand if his sole trader business had been called WipingWindows and this business becomes a limited company than he certainly can dispose of his goodwill in that business to the company. And he would be unable to continue operating as WipingWindows unless the company later disposed of the goodwill (and business name) back to him at a later date.
Plenty of accountants help their clients to consider all of the relevant tax and commercial issues that arise on incorporartion including the factors to cinsider on valuing any goodwill that is to be transferred. The better accountants encourage their clients to support the transfer by relevant legal documentation (prepared by a lawyer) and, to get professional advice as to the value that could be attributed to the goodwill being transferred. Few accountants have the necessary expertise for either of these areas of advice so, if clients resist the idea of taking specialist advice it's a good idea to make clear that your views are not formal advice. After all, you probably wouldn't want to invalidate your PI policy by advising on areas outside of your expertise.
HTH
Mark Lee
Thanks Mark
Thank you for, as ever, posting such a detailed reply. We have always passed valuation work to a local firm and have found that HMRC have always accepted their valuations. The comment that "HMRC assert then as worthless" was picked up in a conversation at an accountants network some time ago. We do very few of these and haven't had a sole trader look to incorproate since. In terms of the PI situation I agree that we must stick to the areas we know about, we have always had a policy of refferal when we feel that it is the client's (and our) best interest. Clients generally seem to quite like being refered to a "specialist".