The HMRC/ Valuation Office Agency (VOA) Practice Note, 'Apportioning the Price Paid for a Business Transferred as a Going Concern', has been updated following a discussion process with the CIOT.

The practice note explains the issues that have arisen where a property is a 'trade related property', eg, public houses, hotels, petrol filling stations, cinemas, restaurants, care homes etc, where there can be particular difficulties in identifying the sum attributable to 'goodwill', which is fundamental to the apportionment of the price paid for a business as a going concern.

There are a host of real and practical reasons why the assets in such premises cannot be actually separated without depreciating their combined value but HMRC now accept that for taxation purposes, they need to recognise the contribution that each asset makes to the combined value.

The practice note sets out how HMRC and the VOA consider one should go about apportioning the price paid for a business as a going concern between goodwill and other assets included in the sale. It reflects the VOA view that the appropriate method of valuing this type of property is by reference to the profit making potential of the premises.

The VOA are currently discussing this valuation approach with the Royal Institution of Chartered Surveyors.

More details are available from HMRC at HERE