Another tax headache for business purchasers

Posted: Thursday, 7 August 2008 @ 16:30

We all know that land transactions are potentially liable to Stamp Duty Land Tax (SDLT) but did you know that, in certain circumstances, SDLT can be charged on some or all of the goodwill of a business?

This is what the HMRC manual says on the subject of SDLT:

Stamp duty land tax is a charge on transactions in 'land'. Thus the subject-matter of the charge includes anything forming part of the land as a matter of law, such as buildings and structures forming part of the land, and fixtures.

This means that the subject-matter of the charge may or may not include what is described as goodwill.

In some instances what is described as goodwill actually forms part of the land. This is often described as inherent goodwill because it is inherent in the land.

In other cases goodwill, sometimes called free goodwill, is separate from the land. …

Free goodwill will only be present on the sale of a business or part of a business, but not necessarily even then.

So when is goodwill 'free' and when is it 'inherent'?

Turning to the HMRC Capital Gains Manual for assistance only serves to complicate matters as it turns out the Revenue considers that there are four types of goodwill:

Personal Goodwill - this relates to the skills and personality of the proprietor

Inherent Goodwill - this relates to the location of the business premises

Adherent Free Goodwill - this relates to the carrying on of a particular business for which the premises have been or are specifically adapted or licensed

Separable Free Goodwill - this relates to the overall worth of the business

The approach which the Revenue appears to be taking is that SDLT is chargeable on inherent and adherent free goodwill, but not separable free or personal goodwill.

For more advice on whether SDLT is chargeable on the goodwill of the business you are purchasing, contact commercial property lawyer, Steven Petty, on 01926 629005.

Steve Petty, Commercial Property Lawyer

For free advice on this topic please call us on 0845 003 5639.

This blog is not intended to constitute legal advice, nor is it intended to be a complete and authoritative statement of the law, and what we say might be out of date by the time you read it. You should always seek legal advice to confirm whether or how any information in this article applies to your particular situation. We offer a free telephone consultation to discuss your particular circumstances.


  • There are no comments for this page - click here to be the first

Need legal advice for your business? We can help


Practical advice and legal support for company owners and directors.


In dispute with a customer or supplier? Get practical advice and support.

Your legal advisor

Your legal advisor
Board level legal advice without the costs of an in-house lawyer.

Speak to a lawyer

Speak to a lawyer
Cousins Business Law excels at demystifying potentially complex legal areas for small business owners
Simon Moore, MD Moore News Ltd

Get legal updates

Enter your email address to receive our monthly Blog Newsletter

We will keep your email safe in accordance with our privacy policy.

Get the FREE definitive guide to solving business disputes

Posts by author

Speak to a lawyer

Get legal updates

Enter your email address to receive our monthly Blog Newsletter
The Law Society