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A budget for bankers

Gordon Brown

April's budget proposals from UK finance minister Gordon Brown contained a few little noticed but significant measures that might benefit UK companies, notably the proposal to make purchases of intangible assets, including goodwill, tax deductible bringing the UK into line with the US.

Currently the amortization of these items is not tax deductible. This penalizes firms with large amounts on the balance sheet for goodwill and intangible asset amortization, as they have to declare the deduction from reported income without benefiting from a corresponding deduction from taxable income. The effect is that a company gets tax relief on goodwill purchases year on year, although it is subject to a tax hit when the goodwill is sold and its amortization reversed.

However, there is a crucial difference between what will happen in the UK compared to other countries that allow tax deduction of goodwill, including the US.

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