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
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