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HM Revenue and Customs Brief 25/11


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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 acquisition.


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 April 2002).
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.

HMRC's position

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 29/Part 8
  • 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.

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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.

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Article Published/Sorted/Amended on Scopulus 2011-07-12 11:20:01 in Tax Articles

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