HM Revenue and Customs - Where Is The Goodwill?

Mike Clark

A firm of chartered accountants specialising in the care homes sector is conducting an urgent exercise to find out how many care home operators are being challenged by HM Revenue and Customs, over tax allowances claimed in connection with goodwill on business acquisitions, both in respect of Stamp Duty Land Tax and Corporation Tax.

MIKE CLARK of Morris Lane chartered accountants, in Poole, Dorset, explains why he believes this to be a serious issue for care home owners…

HM Revenue and Customs have in recent times become more aggressive with their stance on apportionment and subsequent tax relief for purchased goodwill on trade related properties such as care homes.

On acquiring a business, it is normal practice for the purchase price of the assets to be apportioned between freehold property, goodwill and chattels, but it is this apportionment to goodwill that is causing friction with HMRC.

No stamp duty land tax is payable on the element attributed to goodwill and subsequent corporation tax relief can be claimed on the amortising of this. As a result, it would appear from an ever increasing number of tax enquiries that HMRC are keen to apportion as much value as possible to freehold property, significantly reducing the value attributable to goodwill.

Many businesses are now finding themselves asking the same question – where is the goodwill? Is the trading potential of the business an asset in itself, or is it inherently inseparable from the freehold property?

Morris Lane has a unique and specialised understanding of the care home sector and is actively involved in a number of goodwill tax enquiries with HMRC, arguing its view that goodwill exists outside the confines of the property and is a valuable separable asset.

As part of its approach to striving to close down these enquiries in favour of the taxpayer, the firm is keen to hear from any businesses with a goodwill stamp duty land tax or corporation tax enquiry in order to collate and present a comprehensive argument to HMRC.

For more information contact Mike Clark at Morris Lane telephone 01202 715950, email mike.clark@morrislane.co.uk or see www.morrislane.co.uk/care-homes.htm


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