Selling my consultancy's client list — how is goodwill taxed?

Start with what is being sold. If your company sells its business assets, including the client list, brand and goodwill, the company is the seller, and the profit is generally taxed within the company's corporation tax computation, under the rules for intangible assets and chargeable gains as they apply to that goodwill. It is not automatically personal capital gains tax, and a company does not get Business Asset Disposal Relief. If you sell your shares instead, you are the seller personally, and any gain is generally subject to capital gains tax, where that relief may be relevant if strict conditions are met.

Goodwill is not simply the number of clients multiplied by a fee. A buyer will look at recurring, retainable revenue, profitability after a market-rate salary for the owner, client concentration, contract terms, churn, and how easily clients will transfer without you. An independent valuation should set out maintainable profits, the method and multiple used, and any discount for key-person or retention risk. Keep the sale agreement, valuation, client profitability records, contracts and prior accounts.

Deferred and earn-out payments need separate attention. A later payment linked to clients staying or to future fees may still be sale consideration, but timing will follow the agreement and whether the amount is genuinely contingent. If later payments depend on you continuing to work for the buyer, HMRC may treat them as income for that work rather than sale proceeds, so keep any handover payment in a separate, clearly priced agreement. If clients leave and an earn-out never becomes payable, you should not be taxed on money you never receive, but the agreement should state how the price is recalculated.

For VAT, a sale of a whole business as a going concern can be outside the scope of VAT if the transfer conditions are met, including that the buyer is VAT registered and intends to carry on the same kind of business. A sale of only a client list, without the rest of the business, needs separate VAT analysis and may be a standard-rated supply. Money left in the company after an asset sale is not automatically tax-free to you: dividends are taxed as income, while a formal winding up may allow capital treatment for shareholders if conditions are met. Take advice before signing, and agree client communication, confidentiality and non-compete terms in the same agreement.