CIRD11680 - Intangible assets within FA02/SCH29: time test: general conditions: time when asset created or acquired: exceptions to expenditure incurred rule: goodwill

FA02/SCH29/PARA121

To address the practical difficulties, described in CIRD11675 paragraph 121 provides that goodwill is regarded as wholly created before 1 April 2002 if the business to which it relates was carried on by the company in question, or a ‘related party’ ( CIRD45105 onwards), at any time prior to that date.

The effect of this provision is that where such a business is sold on or after 1 April 2002 the disposal proceeds of the goodwill will be wholly outside Schedule 29 so long as no part of the proceeds represents further goodwill acquired on or after that date and falling within Schedule 29.

If any of the proceeds do represent further goodwill, then it will remain necessary to apportion the proceeds between the internally generated goodwill (within the CG rules) and the acquired goodwill (within Schedule 29).

Business carried on by related party prior to 1 April 2002

The extension of this rule to the case where a related party carried on the business before 1 April 2002 will be relevant in applying the provision described in CIRD11650. That is because for the purpose of that provision it will be necessary to determine when the related party from whom it was subsequently acquired created the goodwill.