Fair’s fair in goodwill valuation of care homes
This tribunal case hinged on whether care homes should be valued at fair value or depreciated replacement cost for goodwill and amortisation.
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I disagree. If anything it shows that no-one properly understands these things re goodwill etc. Another recent example of that (with the same taxpayer counsel) is here:
https://www.accountingweb.co.uk/any-answers/strange-goodwill-llp-tax-pla...
If you read this bit you're clearly wrong anyway "This first tier tribunal (FTT) case involved the complex interaction between UK GAAP, property valuation and tax legislation." Unless you're being sarcastic here of course.
I disagree with your disagreement. This case has nothing to do with goodwill, the valuation of the goodwill is not in question, both HMRC and the taxpayer agree it is the purchase price less the value of everything else.
I would agree this seems very straightforward, UK GAAP is clear enough that where a reasonably ascertainable market value for the property is available, this should be used as the valuation.
The taxpayer in fact had a qualified valuer provide exactly such a valuation then didn't use it relying instead on a very weak argument as to why they should be allowed to take a different value that, not coincidentally, gave them more tax relief.
They had both types of valuations available to them and chose the one specifically proscribed. A slam, as has already been said, dunk.
Unless you too are being sarcastic, there is no way a first year trainee would understand anything about what you're saying plus the tax aspects etc. per my above comment. Feel free to disagree with that (and make yourself look a fool) if you like.
Also, as far as I'm aware, there is no expert commentary anywhere that says this case was all bleedin' obvious or words to that effect (unlike certain other cases I could cite).
Agreed- struggle to see what reinstatement value has to do with anything here - with all our properties reinstatement is always higher than MV anyway, so strange it is considered lower. (does depend upon materials etc, e.g. most stone built properties have a higher reinstatement value than MV) IMHO the only reason for getting a reinstatement value is for insurance purposes.
Not that I am a valuer but to differentiate goodwill I would have thought the property should have been valued as a care home just built , with licensing /planning but no current occupants, ie on basis of its use class. Comparing that figure with its value as occupied on purchase would then have popped out the goodwill. (A bit like a rent review clause for say a pub that specifically ignores tenant generated goodwill /turnover etc when evaluating market rent)
If you read this bit you're clearly wrong anyway "This first tier tribunal (FTT) case involved the complex interaction between UK GAAP, property valuation and tax legislation." Unless you're being sarcastic here of course.
Not entirely sure I was being sarcastic - there is no complex interaction between UK GAAP, property valuation and tax legislation. That's blowing smoke up the FTT...
As was stated in the article HMRC expect accounts to be prepared following UK GAAP, from which the tax comps/returns are prepared (that's covered in the Principles of Tax paper). The valuation point is moot - GAAP wasn't followed and as I said a first year ACA should have been aware this was wrong, definitely a second year and a qualified accountant would have no excuse (covered in Accounting and Financial Reporting papers).
It looks like you either don't understand the difference between a trainee ACA and a qualified ACA or you are rapidly backpedaling on your above comment.
Unless I'm riding a fixie, backpedalling isn't going to have much of an effect :) Perhaps you should consult the ACA syllabus and see what exams a 1st year ACA trainee has to study - I've helped by referring to a couple...
The problem seems to be that some advisers and some judges don't accept that the way that trade related properties are valued results in little or no goodwill. This is also the issue in Denning & others which is on its way to the SC.
In former times such goodwill was called inherent goodwill as it 'attached' to the building and was not the 'free' goodwill of the owner of he building. The result is the same: the difference between a care home's value as a going concern and its bricks and mortar valuation is not capable of separate sale.