A father and son are a 50:50 partnership. Father retired and the business was transferred to a company owned by the son and his brother. On cessation, the fair value of assets transferred (i.e. fixed assets and stock) was £122,500. Also on cessation, father’s capital account (i.e. undrawn profit) was £144,982 and son’s was £49,479. A 50:50 split of the assets transferred is £61,250 each. Father’s capital account was higher than this and son’s was lower. My question is: have either of them generated any goodwill on the transfer? Also, if there is goodwill from the father would the new company get corporation tax relief when writing it down as it’s not a sale to a connected party?

Arthur Weller replies:
The father is not a shareholder in the new company, so unless a loan account was created on incorporation showing what the company owes him, he has no equity in the new company. The son probably has a share premium account or a director’s loan account in credit. From 8 July 2015 and before 1 April 2019, relief for annual amortisation of goodwill is not available to a company broadly where it is acquired from any party; or where it is acquired from a related party on incorporation from 1 April 2019 and the goodwill was generated internally by the transferor.