One of the key tax issues when a sole trader or partnership incorporates an existing business is the treatment of goodwill. In particular, can the new company claim tax relief for writing down the goodwill after acquiring the business?
This should be possible for those who started business recently – by which we mean, those businesses set up from 1 April 2002 onwards. But if your business is more established, then we have a problem…
UPDATE From 3 December 2014 it is no longer possible to claim tax relief for internally generated goodwill in line with the accounts when incorporating a business. This is due to the announcement in the Autumn Statement of 2014 restricting deductions for goodwill when a close company acquires a business from an individual or partnership, and the company is related to the seller(s).
However, the following article is still relevant to the question of when a person becomes entitled to shares in a company that are to be issued to him under a contract.
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