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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
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Goodwill: death

Death of sole proprietor

For CG purposes the assets in a deceased person’s estate are deemed to have been acquired by the personal representatives at their market value as at the date of death, TCGA92/S62(1)(a), but they are not regarded as being disposed of by the deceased at that date, TCGA92/S62 (1)(b). Accordingly, it should not be necessary to consider the market value of goodwill in dealing with the deceased’s tax affairs although a valuation may have been agreed for Inheritance Tax purposes. It may, however, be necessary to consider the market value of goodwill at the date of death in considering the tax liabilities of the personal representatives, trustees or beneficiaries of the deceased’s estate if the business passed to them as a going concern on the death of the proprietor.

It is a question of fact whether or not personal representatives are trading during the period of administration or whether they are merely realising the assets of the estate, see CIR v Donaldson’s Trustees, 41TC161. Where the facts show that the personal representatives are trading they will be treated as having acquired the goodwill of the business at its market value at the date of death and, on a subsequent disposal of the business as a going concern, as having disposed of goodwill along with the other assets of the business. CG32210+ tells you how to obtain a statement of its value.

Where the business passes as a going concern to the trustees or beneficiaries of the deceased’s estate they will be treated as having acquired the goodwill at its market value at the date of death, TCGA92/S62 (4), see CG30770+.

Death of a partner

On the death of a partner the general rules for dealing with a disposal of a partner’s interest in partnership assets will apply, see CG27600+. Any case in which it is claimed that the provisions in TCGA92/S62(1) (a), see CG30330, supersede these rules should be referred to the CG Technical Group.