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Sam Pathak
Sam Pathak, Mr S Pathak MBA FCCA CTA
Category: UK Tax
Satisfied Customers: 465
Experience:  Tax Consultant & Freelance Lecturer over 9 years experience
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When is goodwill tax deductible? I have never dealt with it

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When is goodwill tax deductible? I have never dealt with it before and the rules seem incredibly complex and vague. I have a client that was advised to take £170k goodwill out of his company which he did in 2006 and has been amortising at 10% straight line per annum. I cannot tell from the last three years accounts whether or not this was deducted from the taxable profits or not. Any help most gratefully received! Thanks




Thank you for your question.


In order for me to respond to you more precisely, I would require few more information from you please:


(1) What does the company do?


(2) Is he/she director/shareholder (what % shareholding, if any) of the company?


(3) Was his/her business (sole trader or partnership) incorporated in 2006 and thus goodwill created? When the business, in the first place, was established/started?


(4) Was this £170k valuation just a 'good guess' or with some basis reflecting reasonable market value? Was any formal/structured valuation done at the time?


Thank you and look forward to hearing from you.


Kind regards

Sam Pathak

Customer: replied 3 years ago.
Hi Sam, thanks for your response. In order of your questions...

The business is photography
Sole director and shareholder
I believe your first statement is correct. The business was run as a sole trader prior to this.
I'm not sure but I would assume 'best guess' - it passed an HMRC audit a couple years ago I understand.

Many thanks




Thank you for the additional information.


Apology for the delay in getting back to you; as I was away for a client meeting.


Unfortunately, the answer is no.


No tax relief is available for goodwill amortisation, in this case, because of 'connected party' situation and the value of the goodwill was not based on the independent open market value.


Also, this case appears to be more of a 'personal goodwill' (as this is 'his' sort of personal photography business!) rather than 'business goodwill' as such. This will further deny the relief.


I trust the above clarifies.


Kind regards

Sam Pathak

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