Autumn 2006 Newsletter Contents Into The Unknown Season Of Goodwill Farewell Andre Toon Done Doon Day Of Reckoning Artistic Licence Gizmos Again A Free Lunch Sweet As Nectar Security Concerns Going For A Spin The Cap Does Not Fit While It's Hot? Code Cracking Bad Connection Broken Trusts You Can't Take It With You Dividend Returns IR35 RIP? Spam Spam Spam Breaking Up Duty Calls Time Shift Moving Vans

Season Of Goodwill If you sell a business, you hope to get more for the whole thing than you would for the separate bits and pieces. The extra value is "goodwill" - what it's worth to someone to have a business up and running, rather than having to start from scratch. Often the goodwill in a business will have been created from nothing - it won't have a cost (other than blood, sweat and tears). So anything you get for your goodwill is pure capital gain. The good news is that CGT on a business asset is heavily reduced if it has taken two years or more to make the gain - you only pay tax on a quarter. So if you sell for £100,000, you only pay tax on £25,000, and if you're a top-rate taxpayer, that's £10,000 - just 10% of the number you first thought of. Some people use this on selling a business not to a stranger but to their own company - incorporation. If you put a figure of £37,200 on the goodwill, a quarter of it would be £8,800 - covered by this year's annual CGT exemption and not taxable at all. Your company could then pay you that much with no tax charge at all, instead of taxable salary or dividends. It's a good plan, but it has to be used with care. The Revenue won't accept that goodwill can have any old figure put on it (particularly a convenient one such as £37,200!). Goodwill is notoriously difficult to pin down and value, and if someone "tries it on" the Revenue are likely to argue. In some cases, they think goodwill cannot be transferred to a company, because it sticks with the individual running the business - they then argue that any payment for goodwill is salary or dividend, or even a loan. If you are thinking of incorporating or selling your business, it's important to think about the value of your goodwill. We will be happy to discuss it with you.