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Where Taxpayers and Advisers Meet

VALUATION OF GOODWILL ON INCORPORATION

SCOOBY
Posts:1
Joined:Wed Aug 06, 2008 3:02 pm

Postby SCOOBY » Fri Mar 07, 2003 11:05 pm

Can anyone please assist a sole trader with methods of calculating the value of goodwill on incorporation?

Successful small building business, established 22 years, average turnover £850,000 (past 3 years, 17% - 20% net profit margin.

Many thanks.

Nigel Lord
Posts:518
Joined:Wed Aug 06, 2008 2:18 pm

Postby Nigel Lord » Sat Mar 08, 2003 4:12 am

Scooby

There are a number of methods of computing turnover, however you will need to provide more information viz:

1. Net taxable profits for the last three accounting periods.

2. Details of any pension contributions included in the accounts for the last three years.

3. Details of any payments (salary, benefits, commissions etc., to connected persons (e.g. family and business associates).

4. A summary of the balance sheet.

5. The nature of the business.

It should then be possible to give an indicative figure.

If you need the figure for CGT purposes, it is possible to agree the this with the Inland Revenue prior to filing your tax return. By including an "adjuster clause" in the sale agreement it is possible to change the consideration at this point.

I assume that you have taken professional tax advice prior to considering incorporation. If not, I strongly suggest that you do so, as the nature of incorporation will have a major effect on your tax position in the closing year of the unicorporated business, the first year of the company and going forward indefinitely. There are significant tax saving opportunities that should be considered.

My firm specialises in this area of taxation and will be delighted to act on your behalf.

Nigel Lord
Lord Associates
Taxation & Business Consultants
102 Smarts Lane
Loughton
Essex, IG10 4BS
020 8508 1642 & 07769 931852
lordassociates@ntlworld.com

demetris
Posts:95
Joined:Wed Aug 06, 2008 2:18 pm

Postby demetris » Sat Mar 08, 2003 1:29 pm

We have an article on our website on the subject of the tax savings that can be made by incorporating. We also deal with that in our FREE Special Report on How to Save TAx, which is written in plain language and which we send automatically to Subscribers to our series of FREE weekly newsletters on tax and other business matters. You are welcome to check them out by loggin on to http://www.tax-accounting-london.info

Demetris Savva BA FCCA constantinesavva@accamail.com


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