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HMRC internal manual

Inheritance Tax Manual

Special valuation matters: goodwill


Goodwill ([IHTM25060]( has been defined as the benefit and advantage of the good name, reputation and connection of the business. In practice, it is the ability of the company or partnership to earn in excess of an average return on its tangible assets. Goodwill is an asset of the business and has, therefore, to be valued as such.   
If the deceased owned both 

  * a business, and
  * the property where it was carried on
  * and business relief at 100% is not available

you may ask the VOA ([IHTM23002]( for a valuation on a going concern basis, assuming that 100% Business Relief ([IHTM25021]( is not available.   
However, before you make such a request, ask the taxpayer for 

  * an itemised schedule of the plant and machinery, and
  * separate estimates of the value of the property and of the plant and machinery.

The VOA will take into account the value of any goodwill inherent in the property. The value of any non-inherent goodwill for a business will be furnished only if specifically requested. If you make such a request the last 3 years trading accounts before the death should accompany it.   
Nevertheless, the VOA normally has more information than SAV (whose responsibility it is to value goodwill) for valuing any non-inherent goodwill in the following types of business 

  * licensed premises
  * breweries
  * hotels (including restaurants)
  * cinemas and other specialist leisure properties
  * petrol filling stations
  * residential care and nursing homes
  * mineral undertakings (including brickworks)

If therefore you refer to the VOA the question of the value of any property relating to such a business, you should 

  * add a request for the valuation of goodwill to include any non-inherent goodwill, and
  * inform him of any separate value for goodwill shown by the taxpayer