Apportion the price on a just and reasonable basis, by reference to market values, and record the split in the sale agreement before completion. The split matters because the same amount has opposite effects for buyer and seller: what the seller receives as proceeds for goodwill, fixtures, or stock determines the seller's tax, while what the buyer pays for each item determines the buyer's base cost, capital allowances, or stock cost. If the two parties use different figures, HMRC can challenge one or both, so agreement in writing is essential.
Start with stock. Agree a completion stocktake and value stock at cost, or at market value if lower, with a price adjustment if the stock on completion differs from the amount assumed in the agreement. That stock becomes the buyer's opening stock and is deducted as it is sold, rather than being treated as a capital cost. Next, identify fixtures and equipment separately: espresso machines, ovens, furniture, and similar items. Plant and machinery that qualifies for capital allowances should be valued at second-hand market value, supported by an inventory, photographs, and, where appropriate, a valuation. Where fixtures are in premises, consider whether a joint section 198 election is needed to fix the disposal value for capital allowances, and agree it in good time.
Goodwill is the balance left after stock and identifiable assets have been valued, not a figure chosen first to suit tax. It represents the value of the name, customer base, and trading position. Do not assume it is tax-deductible: for a company, relief for goodwill depends on the acquisition and on whether qualifying intellectual property is acquired with the business, while for an unincorporated buyer goodwill is generally a capital asset whose cost is relevant on a later disposal, not a revenue expense. If fixtures are overvalued, the buyer may claim allowances that HMRC later reduces, and the seller may face a balancing charge; if they are undervalued, the buyer loses allowances and the seller may understate disposal proceeds. Obtain independent advice and valuations before signing, and keep the agreement, stocktake, asset list, valuations, and any election with the tax return.
