George Osborne announced that from 3 December 2014, entrepreneur’s relief (ER) will not be available on the disposal of a business and its goodwill to a company to which the seller is related, a transaction that happens frequently, which is designed to restrict unfair tax advantages on incorporation. 

Under the new rules, an individual’s gain on the sale of the goodwill will be subject to CGT at the normal CGT rates of either 18% or 28%, while under a parallel measure, the limited company will not be entitled to corporation tax (CT) relief on the gradual writing off of the purchase price of the goodwill.

Natalie Miller, ATT president, said: ‘We can see that there might be a case for denying the CT on the company’s purchase of the goodwill from a connected party but we are concerned about the discriminatory denial of ER on goodwill. We appreciate that it may be difficult to agree what the goodwill is worth but that does not alter the fact that the goodwill is an asset of the business.

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