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“ About the matter we have finished checking
“About the matter we have finished checking
Details of the matter we have now finished checking are shown below.
Description of the matter
The application of section 179 Taxation of Chargeable Gains Act 1992 (degrouping charge provisions) to goodwill attached to four businesses, transferred intra-group to The Carphone Warehouse Limited between 2004 and 2007, upon the formation of a joint venture on 30 June 2008 between Carphone Warehouse Group and Best Buy Group.
Our conclusion about the matter
A degrouping charge under section 179 Taxation of Chargeable Gains Act 1992 arises on £107,658,000 of goodwill attached to the four businesses and should be included in arriving at The Carphone Warehouse Limited’s profits chargeable to corporation tax.
Reason for our conclusion
The four businesses, and hence the goodwill, were still held by The Carphone Warehouse Limited when it left its capital gains group on formation of the joint venture.
Our conclusion about this matter does not affect anything else that we’re still checking in the Company Tax Return for the period shown above.”
There had been protracted correspondence and discussions between the parties in relation to the application of Section 179(3) in respect of the Goodwill for a considerable period of time before the PCN was issued. The fact that the Correspondence set out in paragraphs 44 and 45 above includes letters from 2012 and 2015 shows as much.
In the course of that correspondence and those discussions, following a meeting of 10 May 2018 and a subsequent letter of 4 June 2018, Officer Andrew Lake of the Respondents wrote to Ms Anjali Sankla, the head of tax at Dixons, on 28 August 2018. Toward the end of that letter, immediately before the final section setting out the next steps in the process, Officer Lake said the following:
- Heading
- Introduction
- Key parties
- Acquisition of the Businesses
- The SPA and the MSA
- The Degrouping
- Procedural background
- the agreed issues
- the agreements
- The SPA
- The MSA
- The Side Letter
- Initial observations on the Agreements and the Side Letter
- other documents
- The Prior SPAs
- The Property Services Agreement
- The Brand Licence
- The Accounts
- The Invoice
- “ About the matter we have finished checking
- “Partial closure notice (PCN)
- The issues – a summary
- Issue One – applicability of the authorities in relation to statutory construction
- Conclusion
- “15 In the task of ascertaining whether a particular statutory provision imposes a charge, or grants an exemption from a charge, the Ramsay approach is generally described – as it is in the statements
- Issue Two – the scope of the rule prohibiting assignment “in gross”
- Conclusion
- Issue Three – ownership of the Businesses following the execution of the Agreements
- Conclusion
- No provision in the Agreements for the transfer of the Businesses
- No provision in the Agreements for the transfer of assets other than Goodwill or the assumption of any liabilities
- No transfer of employees
- Did BBUK carry on the Businesses after the Agreements became effective?
- This meant that the only way that BBUK could carry on the Businesses was through CPW as its agent. In that regard, I do not doubt the fact that it is possible for a company to carry on a business thro
- Entitlement to the profits of the Businesses
- Conclusion in relation to the ability to dictate the overall strategy and direction of the Businesses and entitlement to the profits of the Businesses
- Final observations
- Conclusion
- Issue Four – assignment in equity
- Conclusion
- Issue Five – not the same asset
- Conclusion
- Issue Six – the relevance of the transaction effected by Agreements in the event that Section 179(3) applied
- Conclusion
- Issue Seven – the tax consequences of the transaction effected by Agreements in the event that Section 179(3) applied
- Conclusions