Massive change on business acquisitions

In a Budget full of surprises perhaps the biggest shock for corporate taxpayers was the immediate withdrawal of tax relief on acquisitions of goodwill and other intangibles.

Up until today a company which purchased the trade and assets of a business was able to get a tax deduction for the cost of the goodwill and other intangibles which it acquired. That tax deduction would typically be phased over a number of years. Now, suddenly and with no advance notice or leaks, this relief seems to have been withdrawn and instead companies will only get relief when the sell on that goodwill. The reason for the change is, according to the government, to bring the UK into line with other jurisdictions, to level the playing field between share and asset purchases, and to close down avoidance opportunities.

There is very little detail to date in the announcement and it is possible that the change is not in fact as extensive as the wording in the press release implies. Certainly the amounts which the measure is expected to raise (£200m - £300m per year) seem very low for what appears to be such a massive change. Further detail is urgently needed because this change could impact adversely on corporate transactions which are currently close to completion. We can’t afford to wait another week for the publication of the Finance Bill.

If you have any queries on any of the above issues please contact Andrew Hubbard to discuss further.