John Tenconi v The Commissioners for HMRC
[2024] UKUT 110 (TCC)
THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS v JASPER ALEXANDER THIRLBY CONRAN
13 July 2023
[2023] UKUT 166 (TCC)
Upper Tribunal
A company sold a license without the important brand name. The tax office said it was worth only £1, not the £8.25m claimed. They also said a big payment to the owner was really a dividend, not a capital gain.
Key Facts
- •Jasper Conran's LLP (JCO) licensed its eyewear brand to Specsavers.
- •In 2008, JCO transferred the licensing agreement to JCV (a company within Conran's group) for £8.25m.
- •The transfer agreement excluded the Jasper Conran trademark.
- •Mr. Conran treated the £8.25m as a capital gain, while JCV claimed intangibles relief.
- •HMRC argued the assets transferred were worth only £1 and the £8.25m payment to Mr. Conran was a distribution.
Legal Principles
Market value is the price assets would reasonably fetch in an open market.
Section 272(1) Taxation of Chargeable Gains Act 1992
In hypothetical open market sales, pre-conditions to a valid transfer are assumed to be met, but the inherent limitations of the assets remain relevant for valuation.
IRC v Crossman [1937] AC 26; Re Lynall [1972] AC 680
Assets must be valued as they are on the relevant date, not as they might be if certain steps were taken.
Dyer v HMRC [2016] UKUT 381 (TCC)
The valuation of assets in a hypothetical sale does not change the identity of those assets.
Alexander v IRC [1991] STC 112
A distribution 'in respect of shares' means a payment made to a shareholder in their capacity as a shareholder, as a return on their investment.
Sharon Clipperton v HMRC [2022] UKUT 351 (TCC); Shinelock Limited v HMRC [2023] UKUT 00107 TCC
If a shareholder receives a benefit from a company, the onus is on them to show it wasn't received in their capacity as a shareholder.
Bramwell on Taxation of Companies and Company Reconstructions
Outcomes
JCV's appeal dismissed.
The FTT correctly valued the transferred assets at £1 because the trademark, essential for the business's operation, was excluded from the transfer. The principles in Crossman and Lynall do not justify including assets not actually transferred.
HMRC's appeal allowed.
The £8.25m payment to Mr. Conran was a distribution 'in respect of shares' because he failed to show it was received in any other capacity. The FTT's focus on the LLP structure and good-faith valuations was insufficient to meet this burden.
Similar Cases
Mark Alan Smith v The Commissioners for HMRC
[2023] UKFTT 912 (TC)
GCH Corporation Ltd & Ors v The Commissioners for HMRC
[2024] UKFTT 922 (TC)
Michelle McEnroe & Anor v The Commissioners for HMRC
[2023] UKUT 255 (TCC)
Muller UK and Ireland Group LLP & Ors v The Commissioners for HMRC
[2024] UKUT 273 (TCC)