I took on a client who has 'purchased' a child care business. She paid 30K to the previous owner who assigned the present lease (expiring in 3 years) to my ltd company client. The deal is that another 30K is payable to the previous owner once the present lease is extended by 10 years in 3 years time. solicitor contract states the purchase price apportionment is 30K goodwill, 30K assets
i would appreciate your thoughts on both the accounting and tax treatment.
thanks in advance
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Tax seems simple - looks like the company has paid £30k for goodwill and is paying £30k for the assignation of the lease, the latter being contingent on an extension of the lease term.
I'll let others comment on the accounting for the contingent liability.