Goodwill Valuation
Do You Have a Clear Basis for Valuing the Goodwill of Your Firm?
If you are considering incorporating your firm or already have incorporated, it is vital to have an independent, accurate valuation of your goodwill to support the incorporation process.
Goodwill valuations are critical from a tax perspective. By progressing with a goodwill valuation that is not independent, you run a higher risk of having your valuation challenged by Revenue. Depending on the reliefs being availed of, it is not just about having a valuation that is too high. Sometimes the valuation can be too low.
The incorrect or unsubstantiated valuation of goodwill, recognised upon incorporation, detected through a subsequent audit, intervention or aspect query, may lead to Revenue imposing tax, interest and penalties.
Since the start of 2017, Revenue has become even more active in its interaction with the accountancy profession as tax payers, and, understandably, no practicing accountant wants to have their own tax affairs called into question!
Based on 15 years valuing goodwill for accountancy practices, OmniPro has developed a unique approach, assessing activity levels and profitability under 5 headings
To explore the benefits and process of obtaining an independent goodwill valuation, email us or call us today on 053-9100000. We look forward to working with you.
How We Can Help
If you are thinking about incorporating, it is important to obtain a professional, independent valuation in advance of the transition of goodwill as it may be too late when Revenue asks the hard questions. Equally, if you have already incorporated and do not have an independent valuation, you need to consider the risks from a Revenue perspective and the opportunity to substantiate the basis for the transaction already executed.
Irrespective of Revenue interests, having invested decades of hard work building your practice, you will want a true reflection of the worth of the goodwill you have built. Whether for incorporation, sale, merger or succession planning purposes, you want to ensure that the exiting owners are adequately rewarded, while avoiding placing the new owner(s) in a position of trying to uphold a valuation that simply cannot be commercially supported.
As the market becomes more educated and sophisticated, arriving at a valuation based on a simple multiple of turnover is no longer the cast-iron benchmark it once was.
Multiple of turnover is no longer the cast-iron benchmark it once was. With the benefit of over 15 years valuing goodwill for accountancy practices, OmniPro has developed a unique approach, based on assessing the activity levels and profitability of the practice under five different headings.
- The Turnover Method
- The Average Profits Method
- The Super Profits Method
- Commercial Viability
- Market Valuation
Combined with our in-depth knowledge of the market, this enables us to arrive at an accurate, professional, truly independent goodwill valuation.
Steps Involved in Valuing Goodwill
We tailor our approach for every firm to produce a detailed report, designed to stand up to Revenue scrutiny. In general, the steps involved are likely to include the following:
- Initial discussion with the firm
- Review turnover, profitability and related party transactions for at least the three most recent periods
- Numerical calculations performed on five separate bases
- Results reviewed and discuss with firm
- Figures considered in the context of the market the firm operates in
- Draft report and valuation issued