Transferring goodwill on disincorporation

Ryan Mundy MAAT
Ryan Mundy MAAT MAAT, AAT Licensed Accountant Posts: 22 New contributor 🐸

My client is dis-incorporating.

Their is £5,000 un-amortised goodwill on their balance sheet which was introduced when the company incorporated in 2007. There is also a lease of £3,000.

There is one director/related party.

The business is transferring to the director as a going concern to continue as a sole trader.

The market value of the goodwill is £nil and I want to transfer the business to the sole trader in the most tax efficient way possible.

If I write off the goodwill to £nil and show a £5k trading loss, would this be allowable for CT, or would it need to be added back?

Would dis-incorporation relief help in this case? My understanding is that the transfer of goodwill (proceeds) would be at the lower of cost or market value. So on this basis the loss on disposal would qualify as a trading loss and not need to be added back? In the sole trader aacounts the goodwill would be introduced at the same value as the proceeds (in this case £nil). And a claim would need to be made to HMRC, which I would submit with the final CT600.

The lease would be transferred at it's current value, so no profit or loss would occur.


  • TreadStone
    TreadStone AAT Licensed Accountant Posts: 280 💫 🐯 💫
    Not my strongest area, but am I correct in assuming the £5k goodwill was the amount agreed/attributed on incorporation ?

    If so, as it's related goodwill I would say no relief is available. If it had been allowable, surely the goodwill would have been amortised/written-off annually since 2007 ?

    As I say, not my strongest area so happy for others to correct me :)

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