Discussion
Hello
I would be very grateful if someone can give me some advice, my accountant is off this week and this is confusing the life out of me;
I formed a ltd company last year which bought three businesses - three separate trading sites.
I am about to complete on the sale of two of the trading sites. The fixtures and fittings I know represent a gain but what does the goodwill fall under with regards to tax? Do I pay capital gains/ corporation tax on the goodwill proceeds?
For example, site one purchased for £150k, selling at a loss for £81k. It is being sold as a going concern, 95% of the proceeds are goodwill.
Cheers!
I would be very grateful if someone can give me some advice, my accountant is off this week and this is confusing the life out of me;
I formed a ltd company last year which bought three businesses - three separate trading sites.
I am about to complete on the sale of two of the trading sites. The fixtures and fittings I know represent a gain but what does the goodwill fall under with regards to tax? Do I pay capital gains/ corporation tax on the goodwill proceeds?
For example, site one purchased for £150k, selling at a loss for £81k. It is being sold as a going concern, 95% of the proceeds are goodwill.
Cheers!
Ltd company is selling one its sites from the limited company.
Business is childcare; the business was bought by the ltd co. at £150 but is selling one year later for £81k. The split of £81k is £1 lease premium, £2000 fixtures and fittings, £78999 goodwill.
Do I pay any tax on the goodwill element?
Business is childcare; the business was bought by the ltd co. at £150 but is selling one year later for £81k. The split of £81k is £1 lease premium, £2000 fixtures and fittings, £78999 goodwill.
Do I pay any tax on the goodwill element?
pomp1 said:
Ltd company is selling one its sites from the limited company.
Business is childcare; the business was bought by the ltd co. at £150 but is selling one year later for £81k. The split of £81k is £1 lease premium, £2000 fixtures and fittings, £78999 goodwill.
Do I pay any tax on the goodwill element?
Did you buy the business for £150?Business is childcare; the business was bought by the ltd co. at £150 but is selling one year later for £81k. The split of £81k is £1 lease premium, £2000 fixtures and fittings, £78999 goodwill.
Do I pay any tax on the goodwill element?
OK - here are my figures based on what you have said.
Your company bought a business and paid £150,000 to buy it.
The split of the purchase price was as follows -
Fixtures and Fittings - £7,000
Lease - £1
Goodwill - £142,999
Your company has now sold that business and the proceeds on the sale of that business comes to £69,000 resulting in an overall loss on the transaction of £81,000
The split of this loss is -
Fixtures and Fittings - £4,049
Goodwill £76,950
Lease - £1
The sale of the Fixtures and Fittings should be outside of any Capital Gains Tax calculations because a trading business normally deals with Fixtures and Fittings through the Capital Allowance claims in the annual Corporation Tax computations. The proceeds on the sale of the Fixtures and Fittings are incorporated into a Balancing Allowance (if a loss) or a Balancing Charge (if a profit) in the Capital Allowance computation for the year in which the disposal took place.
This leaves the Goodwill. The disposal of the Goodwill created a loss on disposal - so there is no "Capital Gain" on which Capital Gains Tax would be charged.
Certain tax rules on Goodwill changed in March 2015. Between 2002 and 2015, Amortisation of Goodwill (i.e. the annual depreciation showing in the profit and Loss account) was allowed as a tax decuctible cost. Since March 2015 it has not. Therefore, if your company did claim tax relief on the Amortisation of that Goodwill, then the disposal would be treated a bit like the way the Capital Allowance Balancing Charge or Allowance on the Fixtures and Fittings.
If no Amortisation was claimed, my thoughts are that the loss on the disposal of the Goodwill is not offsetable for Corporation Tax purposes. I've had a check on various accounting forums and the whole issue of Goodwill disposals is quite messy because of the rule changes that have occured in recent years.
Don't forget that it is your company that bought the Goodwill and your company that is now selling it at a loss. So the Capital Gains transactions are all part of the company's overall Corporation Tax affairs and nothing to do with you personally or your personal Income Tax/Capital Gains Tax situation.
Your company bought a business and paid £150,000 to buy it.
The split of the purchase price was as follows -
Fixtures and Fittings - £7,000
Lease - £1
Goodwill - £142,999
Your company has now sold that business and the proceeds on the sale of that business comes to £69,000 resulting in an overall loss on the transaction of £81,000
The split of this loss is -
Fixtures and Fittings - £4,049
Goodwill £76,950
Lease - £1
The sale of the Fixtures and Fittings should be outside of any Capital Gains Tax calculations because a trading business normally deals with Fixtures and Fittings through the Capital Allowance claims in the annual Corporation Tax computations. The proceeds on the sale of the Fixtures and Fittings are incorporated into a Balancing Allowance (if a loss) or a Balancing Charge (if a profit) in the Capital Allowance computation for the year in which the disposal took place.
This leaves the Goodwill. The disposal of the Goodwill created a loss on disposal - so there is no "Capital Gain" on which Capital Gains Tax would be charged.
Certain tax rules on Goodwill changed in March 2015. Between 2002 and 2015, Amortisation of Goodwill (i.e. the annual depreciation showing in the profit and Loss account) was allowed as a tax decuctible cost. Since March 2015 it has not. Therefore, if your company did claim tax relief on the Amortisation of that Goodwill, then the disposal would be treated a bit like the way the Capital Allowance Balancing Charge or Allowance on the Fixtures and Fittings.
If no Amortisation was claimed, my thoughts are that the loss on the disposal of the Goodwill is not offsetable for Corporation Tax purposes. I've had a check on various accounting forums and the whole issue of Goodwill disposals is quite messy because of the rule changes that have occured in recent years.
Don't forget that it is your company that bought the Goodwill and your company that is now selling it at a loss. So the Capital Gains transactions are all part of the company's overall Corporation Tax affairs and nothing to do with you personally or your personal Income Tax/Capital Gains Tax situation.
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