Depreciate goodwill to reduce corporation tax liability?

[jacobyte]

Probably one for Eric:

As per the title, can one depreciate goodwill and thereby reduce their corporation tax liability?

[jacobyte]

It's OK, I've found this...

http://www.hmrc.gov.uk/manuals/camanual/ca72300.ht...

[Eric Mc]

"Depreciation" is not allowed for ANY Capital Items as a tax deductable expense (except where the capital item is being acquired under a Finance Lease).


"Capital Allowances" are used by the Revenue instead and there are no specific Capital Allowances on "Goodwill" costs.


There are radical new Capital Allowances rules coming into effect on 6 April 2008. They are so radical that the Revenue do not yet know what they are in full yet (they were announced by Gordon Brown in his last Budget).

[thewave]

Amortisation can be claimed as tax relief on purchased goodwill can it not?

[Eric Mc]

I didn't think so - but if you can find me the section of ICTA that covers this, I would be delighted to know.

[thewave]

Eric Mc said:

I didn't think so - but if you can find me the section of ICTA that covers this, I would be delighted to know.

No idea where it is but I'm sure you can claim 5% (W/O over 20 years) standard on goodwill purchased from a third party, no arguements, but if you have reason to believe it should be written off over a less period, and can provide a reasonable argument, then that should be okay, there are no 'hard and fast' rules as I know. Unfortunately there is no one here to ask, and can't find the file.

Can find out on Monday.

ETA FRS10 covers the goodwill, but I can't see where relief is given against tax, but I'm 90% certain you can. Although, i've never had to do it.

Edited by thewave on Friday 31st August 16:20

[thewave]

Just had a look on the IR website

http://www.hmrc.gov.uk/manuals/CG1manual/CG12000.h...

Broadly, the new regime provides for companies to obtain tax relief for the cost of Intangible Assets based on the amortisation reflected in their accounts

[Eric Mc]

Thanks for searching that out. It seems that it only applies to limited companies, which is rather unfair on sole traders and partnerships.

But it does show that all these corners of tax legislation are orth ferreting out - and that learning is a two way street.