| Headline: A budget for bankers Source: euromoney.com Date: June 2001 Author: Tess Read
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. The tax treatment of goodwill will follow the accounting treatment, and the accounting standards in the UK give companies a lot of scope to define their own policies for the recognition and amortization of goodwill and intangible assets. | |||||||||||||||||||||||||||||||||||||||||