As you will no doubt know, valuation of goodwill is a VERY inexact science - even in the real world, apparently similar businesses can buy/sell for unbelievably different amounts based on the buyers/sellers circumstances. Any valuation can be very subjective.
HMRC are very keen on evaluating exactly what kind of goodwill a business has. Some goodwill is "personal", i.e. a one-man consultancy, some will be part of the property, i.e. a pub, neither of which is readily transferrable on its own, and HMRC could argue that there is no transferrable goodwill.
Assuming that the goodwill in question is transferrable, the valuation is often arrived at by averaging the various different ways of valuation, i.e. 3 times net profit, or 1 times gross profit are two common ways, but watch out for the net profit one as it has to take account of the proprietors time if he's working in the basis, so a sole trader showing profit of £25k probably has no goodwill value as the £25k is little more than the guy's wage if he's working full time. If the net profit was £50k then you could deduct £25k prop's wage leaving £25k times 3 gives a £75k goodwill. If profits are growing, you can add a premium onto the 3 times historic profits, especially if you've got some forecasts showing that work done in the past continues to increase future turnover/profits, i.e. where there is organic growth from within the client base, i.e. customers wanting more, customers referring others, etc. If time/money is required to create future growth, then it won't command much of a premium as it's the buyer who has to do the work and he won't pay much of a premium for that.
Also, some trades, professions, industries have their own goodwill valuations. For example accountancy practices sell for around 1-1.5 times their gross recurring fees - i.e. not based on profits at all, just recurring turnover.
In my experience, HMRC will only challenge goodwill valuations on two grounds - firstly that there is no transferrable goodwill in the first place, so valuation arguments don't even come into it, secondly, when the valuation is ridiculously high or low. If, eg, you place a value of goodwill on a shop for £50,000, and the tax inspector has a quick look and thinks it more likely to be £60,000, he's very unlikely to spend time and effort arguing for such a small difference, but if you place a value of £250,000, or £nil, and he thinks it should be £60,000, then it's almost inevitable he's going to argue.
Don't forget that you can put off the issue of agreeing valuations by claiming hold-over relief and applying for deferment of valuations (I think it's the IR295 form), which neatly side-steps the potential problems of putting in a wrong value at transfer and delays the whole thing until the goodwill is subsequently sold by the transferee, which makes things more certain as once its sold to a third party, there's some evidence of a method of open market valuation that can be extrapolated backwards to prove your value was reasonable in the first place (as long as it was!).
Hope that helps.
