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Goodwill on cessation and tax deductibility

MonsoonMonsoon Font Of All KnowledgeFMAAT, AAT Licensed Accountant Posts: 4,071
in Tax
Goodwill acquired after 2002 (such as on incorporation) can be written down over its expected useful life and the amortisation can be deducted against corporation tax.

Hypothetical question, if a company was to cease to trade and the goodwill was deemed to be damaged to nil, could the company write off the whole balance of the goodwill against tax in the final accounting period? Or would it just get written down as normal and the balance left as an asset, to be balanced against some credit in the balance sheet?

Comments

  • groundygroundy Trusted Regular Registered Posts: 495
    I would claim the remainder on the final tax calc as the goodwill no longer has any value if the business has ceased.
  • GuestGuest Feels At Home Registered Posts: 73
    Monsoon wrote: »
    Goodwill acquired after 2002 (such as on incorporation) can be written down over its expected useful life and the amortisation can be deducted against corporation tax.

    Cannot be claimed against CT if coming from an associated member ie sole trader or partnership to Ltd co. unless the goodwill was created after April 2002 not aquired.

    Wish it did as I'd be due a whole heap of CT relief.
  • Steve CollingsSteve Collings Experienced Mentor Registered Posts: 997
    Monsoon wrote: »
    Or would it just get written down as normal and the balance left as an asset, to be balanced against some credit in the balance sheet?

    You cannot carry assets in the balance sheet at anymore than their recoverable amount so if the goodwill is deemed to have no value it should be written off as an impairment charge to the P&L account.

    Regards
    Steve
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    Guest wrote: »
    Cannot be claimed against CT if coming from an associated member ie sole trader or partnership to Ltd co. unless the goodwill was created after April 2002 not aquired.

    Wish it did as I'd be due a whole heap of CT relief.

    Thanks. My understanding is that if the free goodwill in the sole trader was created after 2002 and then incorporated, then the amortisation is an allowable expense. I remember reading that and thinking it was too good to be true, so I looked into it a lot and came to the conclusion it was allowable, hope I read it right.
    Steve Collings wrote: »
    You cannot carry assets in the balance sheet at anymore than their recoverable amount so if the goodwill is deemed to have no value it should be written off as an impairment charge to the P&L account.

    Thanks Steve. So would the whole writeoff of the goodwill be an allowable expense for CT?!

    I will be reading up on it further over the next month or so but it's good to get peoples' opinions. Thanks all.
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