Goodwill calculation

Antoinnette

I am in the process of incorporating our partnership. It organises CPD workshops for complementary therapists and also offers bookkeeping and accounting services to said therapists. All assets have been fully depreciated so there is none to transfer. However there is a 2000 odd database of therapists and this will transfer to the ltd company. There will be no debtors or creditors to transfer
Do I need to calculate goodwill and do I need to send this to HMRC to check?


Thanks

reader

Antoinnette wrote: »

I am in the process of incorporating our partnership. It organises CPD workshops for complementary therapists and also offers bookkeeping and accounting services to said therapists. All assets have been fully depreciated so there is none to transfer. However there is a 2000 odd database of therapists and this will transfer to the ltd company. There will be no debtors or creditors to transfer
Do I need to calculate goodwill and do I need to send this to HMRC to check?

Thanks

You don't need to calculate goodwill as you can claim incorporation relief.

However if your partnership began after 31/03/2002 (when the intangible asset regime began) then it can be particularly tax efficient to calculate goodwill and:

1) Gain an allowable deduction by amortising (i.e. depreciating) the goodwill, and

2) Crediting the director's loan account with the goodwill.

It is best practice to confirm the goodwill figure with HMRC by completing Form CG34 and paying any capital gains tax.

Accountants firms normally value their practices at 1.25 times of turnover, other businesses may value themselves at 1.5 times of net profit. Valuations vary from business to business and depend on the sector, past performance of the unincorporated business, market value, etc.