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HMRC internal manual

Capital Gains Manual

Goodwill: negligible value claims: TCGA92/S24(2)

The owner of an asset that has become of negligible value may make a claim under TCGA92/S24 (2) to be treated as if he had sold and immediately reacquired it at its negligible value at the time of the claim or at an earlier time specified in the claim.

A successful negligible value claim for goodwill is likely to result in a loss based on its original cost (if any) or, where appropriate, its 31 March 1982 value, see CG13121+.

The fact that goodwill has been written off in the accounts of a business does not necessarily mean that its value has become negligible. The question is whether the facts show that the goodwill of the business as a whole has any value at the date of the claim. A claim under TCGA92/S24 (2) will not succeed unless the facts show that the valuable goodwill of a business has subsequently become of negligible value.

As TCGA92/S24(2) deems the asset to be “disposed of, and immediately reacquired” at its negligible value, a claim is not valid on or after the date on which a business ceases to trade. This is because goodwill does not continue to exist beyond the permanent cessation of the business to which it relates. However, where a business has permanently ceased to trade a loss may arise under TCGA92/S24(1), see CG68070.

Similarly, a negligible value claim is unlikely to succeed where two or more businesses have merged unless, exceptionally, none of the clients or customers of one of the original businesses remain with the merged entity after the merger, see CG68020.

A claim that a partner’s fractional interest in goodwill has become of negligible value will not succeed unless the facts show that the goodwill of the partnership as a whole has become of negligible value, see CG28000.

Requests for valuations of goodwill in respect of negligible value claims should be made to Shares and Assets Valuation (SAV) in the format described in CG68300+. If a valuation is required at the time of the claim and at some other date, for example 31 March 1982, you should make this clear when sending your papers.

If SAV conclude that the business had valuable goodwill at the time of the claim you should seek to persuade the parties to withdraw their claims. Where you are not able to reach an agreement you should refer your papers to the CG Technical Group for advice before arranging a contentious appeal hearing.