Purchase of goodwill

Purchase of goodwill

Didn't find your answer?

A limited company has been set up to buy the businesses of an unconnected ltd co and a connected partnership.

The goodwill paid for the unconnected ltd co is £67K which the new company plans to write off in the first year. Am I right in thinking that this would all be allowable for Corporation Tax purposes in year 1 ?

The goodwill paid for the connected partnership is £50K. This goodwill relates to before 2002. The new company intends to carry this goodwill at cost on its balance sheet. I presume that no corporation tax relief will be available, but what is the tax postion regarding the 2 partners in the original partnership ?

Any help appreciated.

Replies (1)

Please login or register to join the discussion.

avatar
By blok
26th Jul 2010 15:00

.

Goodwill 1.

The amount of goodwill written off in relation to the purchase from the company will be tax deductable, (subject to scrutiny and debate about your accounting policy for doing so).

Goodwill 2.

The partners will have made a capital gain in relation to their disposal of goodwill.  CGT rules apply.  The company will continue to hold this asset as a capital asset and get tax relief for the cost if and when sold.  You still amortise however, but with no tax deduction in the computation.

Thanks (0)