HM Revenue and Customs Brief 25/11
Submit Articles Back to Articles
Issued on 7 July 2011
Goodwill and synergy - companies acquiring businesses carried
on prior to 1 April 2002 by a related party
This Brief affirms HM Revenue & Customs (HMRC) view
that no relief is due in circumstances where it is claimed that
goodwill is created out of synergies realised as a consequence of the
HMRC has previously stated that they would challenge past
claims with a view to litigation where there are arrangements to claim
Corporation Tax relief for goodwill under the corporate intangible
fixed asset regime where a company has acquired a business that was
carried on by a related party before commencement of the regime (1
A case on goodwill, Greenbank Holidays Limited vs The Commissioners for
HMRC, was recently heard by the Upper Tribunal (UT) and was found in
favour of HMRC.
Comments at paragraphs 24 to 28 of the UT judgement indicate
the approach that a Tribunal may take in relation to goodwill arguments
where synergy benefits might arise from the acquisition or merger.
Both the First-Tier and Upper Tribunals confirmed:
- 'goodwill' includes internally-generated goodwill
- 'goodwill' is neither created by the purchaser on
acquisition nor created when recognised in the purchasers accounts
- the goodwill recognised by the purchaser is the same asset
as that disposed by the vendor
- paragraph 121 Schedule 29 FA02 (now Section 884 CTA 2009)
determines the time of creation in relation to the commencement of Sch
- the Section 70 FA09 amendment is a confirmatory amendment
The rules of the regime exclude goodwill in these
circumstances, so no relief is available.
HMRC are aware of arrangements where customers are continuing
to claim relief in circumstances similar to those in Greenbank,
notwithstanding the decision in that case. An argument is advanced that
the goodwill is created through 'synergies' achieved on merging the
business acquired with the existing business. HMRC believe the
Greenbank decision applies in all cases, including those in which a
synergy claim is made, and will continue to challenge past or future
claims with a view to litigation.
About the Author
© Crown Copyright 2011.
A licence is needed to reproduce this article and has been republished
for educational / informational purposes only. Article reproduced by
permission of HM Revenue & Customs.
Follow us @Scopulus_News
Article Published/Sorted/Amended on Scopulus 2011-07-12 11:20:01 in Tax Articles