Separate goodwill

I refer to the recent article The goodwill game and in particular the quote from Halsbury’s Laws of England that ‘goodwill is not a thing that can be separated and dealt with apart from the business out of which it arises but it may be dealt with as an entity separate from the particular premises in which that business is carried on’.

One of our professional partnership clients has recently been approached with a planning idea which seems to treat goodwill as a separate asset by setting up the following structure.

The existing firm is a three-partner solicitor’s practice trading as a traditional partnership (not an LLP). Each of the individual partners sets up a limited company and the partnership ‘sells’ their share of the goodwill to the limited company.

The individual partner would then have a capital gains tax liability but would be able to...