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?
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.
Note: 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.
We recently took a new restaurant client and were reviewing their employee pension arrangements under auto enrollment.
We noticed that the client (employer) was contributing pension on full pay rather than qualifying earnings.
Qualifying earnings – These are your earnings from employment, before income tax and National Insurance contributions are deducted, that fall between a lower and upper earnings limit that are set by the Government.
Example: CD Ltd has an employee Jane and her monthly salary is £1,500.
Additional employer’s contribution under full pay method is of £10.
This employer has c30 employees. Thus yearly savings are of c£3,500.
This employer also has couple of employees over upper limit, thus additional savings.
Restaurant trade inherently has a high staff turnover and it’s advisable to postpone staff pension deductions for three months to avoid deducting pension for staff members who work for a short time with the employer. We also implemented at this client which will result in additional savings.
Caution: Please ensure employees are communicated about these changes.