Historically, when considering the incorporation of an existing sole trading activity or partnership into a limited company, a big benefit to doing this was the ability to ‘realise’ the goodwill built up in the existing business, and access this value at a low tax rate (if Entrepreneurs’ Relief applied).
Since 3 December 2014 the rules on incorporation and goodwill have gone through significant changes, impacting on both the tax reliefs available on incorporation, and the tax deductibility of the amortisation of any goodwill acquired by the new business.
It is therefore important that when looking at incorporation, the tax position is considered so that there are no unexpected surprises.
