Muller UK and Ireland Group LLP & Ors v The Commissioners for HMRC
[2024] UKUT 273 (TCC)
Armour Veterinary Group Ltd v The Commissioners for HMRC
13 June 2024
[2024] UKFTT 539 (TC)
First-tier Tribunal
A veterinary company tried to deduct the cost of its goodwill (the value of its reputation and customer base) from its taxes. The tax man said no, because most of the goodwill was built up before a certain date (April 1, 2002), making it ineligible for the deduction. The company argued that their business practices meant that they should be allowed to take the deduction, but the judge agreed with the tax man, highlighting the importance of keeping good records and that the company didn't have good enough evidence to support their claim.
Key Facts
- •Armour Veterinary Group Ltd (AVGL) claimed amortisation relief for goodwill.
- •HMRC issued discovery assessments, disallowing the relief.
- •The goodwill originated from several sources: initial business, a 2012 acquisition (Dalblair), and a partner's contribution.
- •The key dispute centered on whether the goodwill was created before April 1, 2002, impacting eligibility for relief under the Intangibles Regime (Part 8, CTA 2009).
- •The pre-2002 question hinged on the status of Mr. Hewitt, who was involved in the business before 2002 but whose partner arrangement wasn't clear-cut.
- •The nature of the partnership (Scottish) also became relevant, though the difference in treatment compared to other partnerships isn't fully explored.
- •HMRC's enquiry was thorough, involving multiple information notices and correspondence.
Legal Principles
Discovery assessments require a subjective belief of tax insufficiency by the HMRC officer and that belief must be objectively reasonable.
Anderson v HMRC [2018] 4 All ER 338
Intangibles Regime (Part 8, CTA 2009) applies to goodwill created or acquired after April 1, 2002, with specific rules for related parties (s. 882 CTA 2009). Goodwill is treated as created before April 1, 2002 if the business was carried on before that date by a related party (s. 884 CTA 2009).
Corporation Tax Act 2009
Partnership property is not owned individually by partners; they have a beneficial interest in the realised value of the partnership assets.
Byford v Oliver and Another [2003] EWHC 295 (Ch), Hadlee v CIR, Canny Gabriel
A Scottish partnership is a legal person distinct from its partners (s. 4(2) Partnership Act 1890), but this doesn't change the fact that partners carry on the business.
Partnership Act 1890, Major v Brodie [1988] STC 491
Outcomes
Discovery assessments were validly issued.
HMRC officer reasonably believed there was tax insufficiency based on available information; the subjective and objective tests were met.
Amortisation relief was not allowed for any of the goodwill.
The DCS Alexander goodwill was created before April 1, 2002, because Mr. Hewitt was a partner (carrying on the business) before that date. The Dalblair goodwill claim lacked sufficient supporting evidence. The contribution from Mr Walker was not actually goodwill.
The appeals were dismissed.
The discovery assessments were valid, and AVGL failed to demonstrate entitlement to amortisation relief.