Arthur Weller replies:
Even though the company may have amortised the goodwill, that is only for tax purposes. In actuality the goodwill is still in the company. So the company is still worth £4 million, or thereabouts. However, if the company never paid back to Mr X the £4 million that it owed him, the company in reality is not worth anything, because it has a debt equal approximately to its asset. It would seem that Mr X personally has simply swapped the goodwill asset for a debt. It could be that the goodwill would have been eligible for business property relief, but not the debt from the company. So from an IHT perspective, I don't think that Mr X is any better off.
This question was first printed in Business Tax Insider in April 2017.