ashawandco

Arbclimber, that would be right re maintenance vs tree surgeon though a fully qualified tree surgeon might have less competition and therefore be marked up for that. He might have less work too of course. Definitely not a science! That's a really useful benchmark, though I wish you'd said £50,000! If I use your figure (and it's the right kind of goodwill) I should save the guy £1,000 (20%). I can double that and hope to save £2,000 and the only downside is that HMRC rebut and he ends up paying Capital Gains tax - except he wouldn't 'cos he'd be covered by his £10,100 annual exemption. That may have sent you to sleep! Thanks very much for the info.

No insult taken arbclimber. There are similarities to other businesses of course, but there are differences too; for example, an accountant with a turnover of £100,000 as against a lawyer with the same turnover might be worth more because an accountant tends to have repeat business whereas the lawyer doesn't. Industries tend to have their own 'multiples' of earnings, i.e. business is worth X times its earnings. Valuations are tricky and no two people will come up with the same number. I'm just trying to gather as much info from as many sources as I can so that if HMRC does try and argue with me about the value I can give him something to back it up, even if some of my info is only anecdotal. Wouldn't you want your accountant to be interested in your industry? I reckon the better I understand it the more helpful I should be. How old was your business when you sold it? Did you operate alone or did you have help/employees?

Thanks Justme. No, probably not much value at this stage but every little helps. Your points are all well made and good ideas.

Thanks Edenarb. Never intended to offend anyone (and don't really understand how I seem to have - apologies to those I have offended) and won't comment further on that, tempting though it is. I'm just trying to learn what I can about the industry so I can help someone who's in it. If anyone can help, it'd be great to hear from you.

Mate, I'm not asking how to do the tax or the double entry. I'm asking whether anyone here had any knowledge (from personal experience) of valuing a tree surgeon's business - earnings multiples, etc. You quite rightly say it depends on the nature of his business, but it also depends on the specific industry. The guy I'm talking to is a one man band currently doing everything himself; he's only been going a year but seems to be doing well. There won't be much goodwill as it's a new business, but to get the best result that I can for him when he incorporates, I want to get the goodwill as high as possible and would like to be able to back that up. It's not an accounting or tax question I'm asking, it's a valuation question and I was hoping that, maybe, some people in the industry might be able to help me. Perhaps not.

Thanks for the replies. Trying to ignore the arbuse (!) but I know how to make the transfer and I know how to treat the goodwill thanks landrover 101. Since you ask, I qualified about 20 years ago, but I can't claim to know everything - passing the exams is one thing, the real world is quite another. The rules also have a nasty habit of changing every year. Justme: the Ltd company is a whole new legal entity and, while you do own it, it's distinct from you as an individual for both tax and legal purposes (which is why you can limit your own liability in the ltd co). There are various rules about how you should move your business from being a sole trader to being a ltd company. Most of those rules are to do with tax - specifically capital gains tax - and what value is given to the company on the transfer. Having a value for (certain kinds of) goodwill can give you a nice little tax benefit. Probably not a reason to make the switch on its own but it can certainly pay for the cost of doing do. Anyway, the tricky bit with all this is calculating how much the goodwill is. This is all tied up with how you value a company (and with it the goodwill). I was hoping someone on this site might have had some relevant experience with this as these tend to be industry specific so a plumbing company of comparable size would have a different value to a tree surgeon.

For those of you who have made the switch from sole trader to limited company, did you get a value for the business on transfer and was there any goodwill? I ask as an accountant with a new client who is a tree surgeon. Trying to get familiar with this world of yours!