Goodwill on sale of business

tax treatment

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Hi everyone - no doubt this question has been asked before - go easy on me!

I have a client (accounts under FRS 102) who has just sold their trading business (they were trading under a ltd co).

Lets say the sale was for £10,000, of which £7,500 was for the FAs and £2,500 is for goodwill.

There is no goodwill within the accounts, so this has been generated internally.

My query is does this goodwill need to be included on the P & L account and treated as taxable as trading profits?

Thanks in advance for you input.

Replies (6)

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By MuayThai
02nd Sep 2020 17:49

Sale of shares or trade and assets?

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Replying to MuayThai:
Psycho
By Wilson Philips
02nd Sep 2020 17:55

You'd think it obvious from the question, but I agree - far too often we see 'business' and 'company' being interchanged.

Depending on the answer to your question, I might also ask when the business commenced.

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By Paul Crowley
02nd Sep 2020 20:52

Just a quick question?

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By johngroganjga
03rd Sep 2020 09:58

You are going to need to explain whether your client has sold his shares in a company, or whether he has kept his shares but the company has sold its fixed assets and goodwill.

As you are asking about preparing the accounts of the company after the sale has taken place, I am guessing that it was an asset sale by the company, or else you wouldn't now be preparing the company's accounts, but do please confirm.

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Replying to johngroganjga:
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By simonhyett
07th Sep 2020 15:13

Hi John - thanks very much for taking the time to reply - your guess is correct - trade and assets

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By seandrowe
03rd Sep 2020 10:46

looks like an exam question?

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