Father and Son partnership dissolved in 2004. Father recommenced trading as a sole trader immediately whilst Son formed a completely separate Ltd Company and started trading in the same line of business but in a different part of the country.
Son has now purchased the sole trading business of his Father including £30,000 of goodwill. Does the fact that the father started trading as a sole trader after April 2002 still qualify the amortisation of the goodwill for tax relief. I am concerned that revenue could see this as a contrived set of circumstances even though it was a genuine situation.
Many thanks
David Brown
Related resources
Replies (2)
Please login or register to join the discussion.
Theoretically, yes..
..but, HMRC may indeed suggest that the goodwill was not created after April 2002.
If someone trades as a partnership and a partner leaves (the son in this case) then if the remaining partner continues as a sole-trader then that is not really the commencement of a new trade.
I would therefore suggest that you have old goodwill which is then being transferred to a connected party and thus it will remain old goodwill.
If there genuinely was a cessation and commencement of a separate trade then I would suggest you keep a good record of the facts and circumstances.
I think this is OK
Given that intangible asset (goodwill) was entirely created after 31/03/2002, it seems to me to qualify as a Corporate Intangible in the hands of the acquiring company, nothwithstanding potetial issue of related parties.
HMRC guidance may help reassure:
http://www.hmrc.gov.uk/manuals/cirdmanual/cird11625.htm
http://www.hmrc.gov.uk/manuals/cirdmanual/cird11650.htm