What is the goodwill?
Definition of goodwill
Goodwill is the difference between the value of a business as a whole, and the value of its assets taken individually.
Example of goodwill:
If someone bought your business, they wouldn’t just be buying your computer, furniture and so on. You would want them to pay for the value you’d built up over the years in assets that can’t be seen or touched, such as your portfolio of happy repeat customers.
The difference between the value of your business as a whole and the value of its assets is the goodwill.
You can’t include goodwill as an asset of your business on your balance sheet unless it’s actually been paid for – so no goodwill will appear on your business’s balance sheet unless and until the business changes hands.
Corporation Tax relief on goodwill and relevant assets
What is the relief
You can now get relief on purchases made on or after 1 April 2019 if the:
- goodwill and relevant assets are purchased when you buy a business with qualifying intellectual property (IP)
- business is liable to Corporation Tax
- relevant assets (including goodwill) are included in the company accounts
Find a full definition of goodwill and relevant assets on GOV.UK in the Corporate Intangibles Research and Development Manual CIRD44060.
How much relief you can get?
Relief is a fixed rate of 6.5% a year on the lower of the cost of the relevant asset or 6 times the cost of any qualifying IP assets in the business purchased.
Relief is given yearly until the limit is reached. More information about how to work out the relief can be found on GOV.UK in the Corporate Intangibles Research and Development Manual CIRD44093.
How to claim
You must complete a Company Tax Return and include the relief. This will reduce both:
- your company or organisation’s taxable profit
- the amount of Corporation Tax you have to pay