Clear guidance given in HMRC agent toolkit Capital v Revenue – Page 18.
- Sole Trader and partnership : No deduction allowed.
- Company: treatment given below:
|When was the goodwill acquired?||Tax deduction|
|Before 1 April 2002||No deduction allowed.|
|Between 1 April 2002 to 3 Dec 2014||Deduction allowed as per amortization in accounts – under Corporate intangible assets regime ; or|
At fixed rate of 4% WDA
Deduction was also allowed for goodwill purchased from related parties.
|3 Dec 2014 to 7 July 2015||Amortisation allowed but only if goodwill purchased from unrelated party.|
|From 8 July 2015 to 31 March 2019||No deduction allowed|
|From 1st April 2019||Relief @ 6.5% avaliable in certain cases – please see CIRD44050|
Where no qualifying IP acquired, no relief.
No relief for goodwill purchased from related parties.
1. Where deduction is not allowed for trading profits . Deduction should be taken for Capital Gains Tax calculation.
2. Please note rules only allow relief to be claimed when a company acquires a business directly rather than acquiring the shares in the target company. Purchased goodwill can only be recognized on a business acquisition but not on an acquisition of shares.
Moral of the story
HMRC has prepared fantastic tool kits, please use it regularly to avoid mistakes.