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Sale of goodwill by limited company

Is there tax relief on the original cost?

Didn't find your answer?

Being that customer related intangibles no longer qualify for tax relief from amortisation under any circumstances I wonder if tax relief on purchased goodwill (not from related party) is at least obtained when that goodwill is sold on?

Eg. Limited company buys say 100 customers for £100,000 and immediately sells say 10 customers for £10,000 can the goodwill purchase cost of £10,000 be matched against the sale proceeds? So that in this case there is no gain chargable to corporation tax?

And just to check that this would be a chargable gain under corporation tax and not just a trading receipt?

Replies (7)

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Hallerud at Easter
By DJKL
24th Apr 2017 10:41

Is A /(A+B) on point here re attributable cost? Not sure a £1,000 per customer base price assumption is correct.

Thanks (1)
Replying to DJKL:
By Ruddles
24th Apr 2017 11:03

A/(A+B) is largely a CGT concept - the OP doesn't say whether the goodwill in this case is 'old' or 'new'. (Although suggested timing of purchase and sale would suggest 'new'.)

If the goodwill is new, then the correct formula (which may or may not give the same answer) is (AVB-AVA)/AVB.

Thanks (1)
By chewmac
24th Apr 2017 11:34

Hi, I agree you're both right - this would be a part disposal of what was originally a block of customers purchased.

Definitely new goodwill.

I believe that even after applying the part disposal formula my example = break-even.

I was just double checking that tax relief for goodwill is available when disposed of? (the no more amortisation relief thing cause my doubts).

And, that this should be declared as a chargeable gain / event and not simply as trading income.

Thanks (0)
Replying to chewmac:
By Ruddles
24th Apr 2017 12:02

If it's new goodwill then there is no chargeable gain. Assuming, as would appear to be the case here, it's held for trade purposes any profit will simply be taxed as a receipt of the trade. If you have a deficit, it's a little more complicated.

Thanks (1)
By chewmac
24th Apr 2017 15:40

Thanks Ruddles but I think my question is more basic than you're giving me credit for.

Ignoring partial disposal calc - let's say there was a profit. Let's say £11,000 sale less £10,000 original cost of customer goodwill. I presume the chargeable gain is just £1,000 and not £11,000?

Also, that this is a chargeable gain and not just a trading profit as far as CT600 is concerned?

Thanks (0)
Replying to chewmac:
By Ruddles
24th Apr 2017 15:54

Aaaarrgghhh

Proceeds £11k, cost £10k. How can the gain possibly be £11k?

I'll repeat - for the last time - if it's new goodwill then it is NOT a chargeable gain. See the link below (or is it above?)

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