Tax treatment of purchased goodwill

Tax treatment of purchased goodwill

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A company pays say £200,000 as part of a deal to acquire the business of another company. All they are effctively buying is a future income stream - no fixed assets, no debtors, no liabilities.

It is my understanding that there will be no tax relief at all for that £200,000 - not as revenue by deduction from profit, nor as capital allowances. Is that correct?

Thanks.
Graham Pears

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By jamesbailey
14th Oct 2005 11:26

Goodwill deduction for tax
Dear Graham

There may well be relief for these costs, under the "Corporate Intangibles" rules.

There are a number of caveats to do with timing, whether the two companies were connected, and so on.

I suggest you have a look at the HMRC website - start with the "Corporate Intangibles Research and Development Manual", at CIRD 11070.

If you get stuck, I'd be happy to help on a professional basis.

James Bailey. Chartered Tax Adviser
[email protected]
01822 810169

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