According to the dictionary goodwill is:

1. a feeling of benevolence, approval, and kindly interest

2. (modifier) resulting from, showing, or designed to show goodwill: the government sent a goodwill mission toMoscow.

3. willingness or acquiescence

4. (Accounting & Book-keeping) accounting an intangible asset taken into account in assessing the value of anenterprise and reflecting its commercial reputation, customer connections, etc

Goodwill, as discussed in this post, is the intangible asset, that amount that a buyer is willing to pay for your business over and above the valuation of physical assets (plant, equipment, stock, property and net working capital).

If you have a business, goodwill is a payment a buyer is prepared to pay for your customer list and the reputation that your business may have built over the years.

Valuing goodwill is a tricky process as it necessarily involves consideration of intangible items. Ultimately, the agreed valuation will be the amount someone is prepared to pay, and the amount you are prepared to accept.

How is the sale of goodwill treated for tax purposes?

A company or person selling goodwill will create a taxable gain. If possible, sole-traders, partners or shareholders would seek to have this gain taxed under the capital gains tax legislation and claim reliefs that would restrict any tax payable to 10% of the chargeable gain.

HMRC, on the other hand, would prefer that any gain is taxed as income, and subject to the much higher income tax rates.

These opposing points of view can make for lengthy and complex arguments that often play out in the courts.

Goodwill is a payment for the hard work that you have committed to your business and you will want to plan for any sale with an eye to any tax payable, which is why planning a sale is a must-do. Very often the way that you structure a sale, and its timing, will determine the tax outcome.

As with most tax planning this process should be completed before contracts for sale are signed.

Readers contemplating a sale should invest in professional advice. In this way you will maximise the amount you receive for goodwill and minimise any tax liabilities. Please call if you would like to discuss your options, we can help.

In the not too distant past, if you filed a set of accounts for a registered company with Companies House this usually involved sending the required documents using the postal system.

Inevitably, this involved a certain amount of delay: initially, for the package to find its way from your location to Companies House, and then for the document to be opened and processed. Which is fine if allowed plenty of time for delivery to complete or to send a replacement set of documents if the item was “lost in the post”.

Clearly, leaving this process to the last minute is a recipe for disaster as there are now fines if you fail to file accounts or other documents by the required filing deadlines.

Fortunately, Companies House now has an online filing portal which means you can file using an electronic version of your accounts; no more fretting about the postal system.

From 1 October 2019, Companies House are updating their internal guidance which dictates how they will respond to appeals against late filing penalties.

In a recent press release Companies House offered the following advice to companies:

We remind all customers to:

• plan ahead – do not leave your accounts until the last minute
• make sure your accounts are correct before you file them
• check the status of all documents you’ve filed using Companies House service

You should also use our online filing service wherever possible. It:

• is quicker to complete and register (it can take around 10 days to process paper accounts at peak times)
• uses less paper and is more environmentally friendly
• lowers your risk of getting a penalty, as companies receive electronic confirmation that we’ve received your accounts and if they’ve been accepted or rejected
• has lower rejection rates than paper filed accounts (0.5% for electronic accounts against 6% for paper filed accounts)

Clients reading this update will be relieved to note that we do file accounts – where this is possible – online.

For those readers who still rely on the postal system please give yourself plenty of time, failure to meet the required deadlines can result in significant financial penalties. Currently they are:

• £150 – if less than one month late
• £375 – if more than one month but less than three months late
• £750 – if more than three months but less than six months late
• £1,500 – if more than six months late

The above penalties automatically apply to all overdue accounts. Failure to comply with the filing requirements for the previous financial year will result in the above penalty being doubled.

And don’t forget:

A private company has 9 months from the end of the accounting reference period in which to deliver its accounts, and if you change the accounting reference period the filing time may be reduced.

If you are in business you either buy (manufacture) or sell goods, or you deliver a service based on your personal skills.

If you buy or sell goods there is no reason to believe that once you have achieved a sale to a particular person of business, they will return to buy again. Unless, what you sell will eventually “run-out” and the buyer will return to buy again. Importantly, to make subsequent sales of goods you will have to manage stocks and a delivery function.

If you sell services that fix one-off issues – say remove a dead tree – once the service is delivered, unless the customer has a forest, it is unlikely they will contact you for more dead-tree removal issues.

However, if you are contracted to mow acres of lawn for a local authority, as long as you don’t fall foul of spending cuts or other issues your contract to provide these services will reoccur.

Again, to deliver these recurring services (as with repeat orders of goods) you will physically need to maintain equipment and supply labour.

In all of the above cases, where there is a recurring element to repeat business value can be attributed, but something has to be done in order to deliver the repeat business.

What if you could build income streams based on an initial effort, but no follow-up activity (or very little) to maintain the income stream?

For example:

• you could write a book and enjoy royalties
• create a subscriber list for your news copy
• buy and let a property
• invent a product and receive licence fees

In all the above there is the possibility to leverage the benefits of your initial actions that will enable to receive income while you are “on the beach”.

1 July 2019 – Due date for Corporation Tax due for the year ended 30 September 2018.

6 July 2019 – Complete and submit forms P11D return of benefits and expenses and P11D(b) return of Class 1A NICs.

19 July 2019 – Pay Class 1A NICs (by the 22 July 2019 if paid electronically).

19 July 2019 – PAYE and NIC deductions due for month ended 5 July 2019. (If you pay your tax electronically the due date is 22 July 2019)

19 July 2019 – Filing deadline for the CIS300 monthly return for the month ended 5 July 2019.

19 July 2019 – CIS tax deducted for the month ended 5 July 2019 is payable by today.

1 August 2019 – Due date for Corporation Tax due for the year ended 31 October 2018.

19 August 2019 – PAYE and NIC deductions due for month ended 5 August 2019. (If you pay your tax electronically the due date is 22 August 2019)

19 August 2019 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2019.

19 August 2019 – CIS tax deducted for the month ended 5 August 2019 is payable by today.

New defensive controls recently deployed by HMRC have put an end to fraudsters spoofing the tax authority’s most recognisable helpline numbers.

Fraudsters have increasingly mimicked legitimate HMRC helpline numbers (often beginning with 0300) to dupe taxpayers and steal money. Last year alone, HMRC received over 100,000 phone scam reports.

The ‘spoofing’ scam worked as taxpayers would receive calls and, on checking the numbers online, would find they appeared to belong to HMRC. This often led people to believe fake calls were real and enabled fraud.

The new controls, created in partnership with the telecommunications industry and Ofcom, will prevent spoofing of HMRC’s most used inbound helpline numbers and are the first to be used by a government department in the UK.

Criminals may still try and use less credible numbers to deploy their scams – but that means they will be easier to spot.