Goodwill Value on Incorporation

When a sole trader converts his or her business to a company, goodwill is often sold out of the old business and becomes an asset of the new company to the benefit of the sole trader. HMRC is taking considerable interest in such transactions and will challenge goodwill values which it believes to be excessive. We have extensive experience in preparing goodwill valuations in these circumstances and a successful track record in negotiating these values with HMRC.

It is desirable that valuation advice is sought early in the process if the optimum value for the goodwill in an unincorporated business is to be achieved. Estimated goodwill values can be included in Business Purchase and Sale Agreements which can then be adjusted later for the final value agreed with HMRC but many clients prefer to be more certain of their potential tax liabilities following such a transaction. In any event, in transactions involving significant goodwill values, challenge by HMRC is highly likely if not inevitable.

How we can help

We can value the relevant goodwill and advise on the negotiating stance with HMRC. We can also conduct such negotiations on our clients’ behalf.