Goodwill

The stamp office have recently revised their policy on goodwill in relation to apportionment of consideration on the sale of a business as a going concern.

Inherent goodwill (broadly the goodwill generated by the location of property) and adherent goodwill (broadly goodwill which is not inherent but attaches to the property) would appear to be accepted by the stamp office as being part of the property and not goodwill at all i.e. it is impossible for such goodwill to be sold separately from the property and it will always be reflected in the property value.

Free goodwill (broadly the goodwill generated by a business representing “added value” to the collection of tangible assets making up the business) is the remaining element of goodwill which should now be treated by the stamp office as a separate asset to the property.  As a separate asset it should be possible to avoid payment of SDLT on free goodwill.

Despite the helpful clarification provided by the stamp office, goodwill remains a contentious matter.  The apportionment of price in any sale contract between property and goodwill must be ‘fair and reasonable’ in the eyes of the stamp office.  This allocation must also be considered with a view to capital gains tax and capital allowances.

For more information please email jfeaster@edftax.co.uk or call 07526 003021 to speak to John.