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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4995
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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What should the capital allowance rate be generated

Resolved Question:

What should the capital allowance rate be for goodwill generated on incorporation of 10k please prior to Dec 14
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for your question.

Please advise what you regard as the useful life of the goodwill..
There is no capital allowance rate for goodwill...

If the company decides that the useful life of the goodwill is 10 years, then you would amortise it over this period at 10% per annum and write off as an expense and not as a capital allowance.

More information on this can be found in HMRC manual CIRD10116 here

http://www.hmrc.gov.uk/manuals/cirdmanual/cird10116.htm

General guidance on capital allowances can be found in HMRC manual CA10020 here

http://www.hmrc.gov.uk/manuals/camanual/ca10020.htm

More information on this can be found in HMRC manual CIRD10116 here

http://www.hmrc.gov.uk/manuals/cirdmanual/cird10116.htm

General guidance on capital allowances can be found in HMRC manual CA10020 here

http://www.hmrc.gov.uk/manuals/camanual/ca10020.htm

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.


Customer: replied 2 years ago.

Thank you, ***** ***** amortisation, I am amortising it over 5 years at 20%, however the HMRC online software is telling me that that is too much and will not allow me to go further with the return, many thanks.

Expert:  taxadvisor.uk replied 2 years ago.
Sian, thank you for your reply.

What do you have as your accounting policy?
I know 10 years work..

I hope this is helpful.
Customer: replied 2 years ago.

Thank you, ***** ***** be 18% and not 20%? I was told by a chartered accountant that this is acceptable, however even this amount is challenged by the software, or would you suggest as you previously said to amortise it at 10% thank you

Expert:  taxadvisor.uk replied 2 years ago.

Sain, thank you for your reply...

By applying the rate of 18% you are amortising goodwill over 5.5 years. If this is what your accounting policy is the apply it.

CA at 18% is for general pool items and Goodwill does not fall into it.

I have applied 10% on other clients and had no issue.

I hope this is helpful.

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