Goodwill and other IP

By Tolley

The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Goodwill and other IP
  • Trade and assets sale
  • Share sale
  • Companies leaving a group
  • Related parties
  • Valuations of goodwill and other IP

This guidance deals with companies and not individuals / partners.

Sales or acquisitions of businesses are likely to include the transfer of goodwill and / or other intellectual property.

Intangible fixed assets (IFAs) are assets which are defined as intangible assets under GAAP, which have a continuing use in the company’s trade. For accounting periods starting on or after 1 January 2015, companies must account for intangibles under either IFRS or FRS 102. The definition of intangible assets (other than goodwill) in FRS 102  is “identifiable non-monetary asset without physical substance” where ‘identifiable’ is an asset that is separable or arises from a legal contract or other legal right. Under FRS 102, goodwill is recognised at cost, being the excess of the cost of the business over the acquirer’s interest in the net amount of identifiable assets, liabilities and contingent liabilities. The definition under ‘old’ UK GAAP was in FRS 10  (Goodwill and Intangible Assets).

CTA 2009, ss 712–713

This guidance considers some of the relevant tax issues on a transaction structured as a transfer of trade and assets, or as a share sale.

Trade and assets sale

Debits, eg amortisation, arising in the accounts of the company in relation to intangible assets which were acquired or created on or after 1 April 2002, as a basic rule, are treated as being allowable debits in the period in which they are charged. There is, however, no relief for these debits where the asset is goodwill or a customer-related asset acquired from a related individual or firm (eg on an incorporation) on or after 3 December 2014, or any goodwill or customer-related asset acquired on or after 8 July 2015 but before 1 April 2019. The debits on these assets are not allowed until the realisation of the asset. On realisation, any debit is treated as a non-trading debit. From

More on Buying a company or trade: