Goodwill Valuation

Sion
Sion Registered Posts: 6 Regular contributor ⭐ ? ⭐
Does anyone have any guidance on goodwill valuation.

A business has gone from being a partnership to being a Limited Company and therefore i believe there may be goodwill involved. Mainly because the partnership had built up the customer base and sold it to the limited company. How would i value the goodwill?

Many thanks

Comments

  • reader
    reader MAAT, AAT Licensed Accountant Posts: 1,037
    Sion wrote: »
    Does anyone have any guidance on goodwill valuation.

    A business has gone from being a partnership to being a Limited Company and therefore i believe there may be goodwill involved. Mainly because the partnership had built up the customer base and sold it to the limited company. How would i value the goodwill?

    Many thanks

    Discuss it with the client.

    Try a multiple of the profit as a starting point, e.g. 1.5 or 2 times last year's profits.

    Complete Form CG34 if you are worried about HMRC challenging your valuation.
  • Sion
    Sion Registered Posts: 6 Regular contributor ⭐ ? ⭐
    Many thanks for your help
  • jamesm96
    jamesm96 Registered Posts: 523
    If it's a customer base that's been sold then I might be inclined to consider treating it as a sale of a block of clients (or customer contracts or whatever you want to call it) rather than a transfer of the whole business including goodwill; if there is scope to capitalise some other form of intangible asset rather than goodwill then you'll probably have less of an issue with HMRC.
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