Question of entitlement

A partnership of independent financial advisers was incorporated in 2003. The sole subscriber share was transferred to an employee of the partnership and he was appointed the sole director. In January 2004 another 999 shares were allotted to the employee.

At the end of that month the partners and the taxpayer company entered into a written agreement for the sale and purchase of the partnership business as a going concern with the goodwill and some assets for a consideration.

This was partly satisfied by giving on the same day 3 000 shares to the partners each of whom was then appointed a director.

The acquisition of the goodwill was shown as an addition to intangible assets in the company’s accounts to 31 March 2004 and a charge of £13 906 amortisation was entered in the profit...