TC09562 - [2025] UKFTT 00762 (TC)

Taking all of the above into account, it is my view that, viewing the facts realistically, as I am required to do by the authorities, not only were the Businesses not transferred to BBUK pursuant to the combined effect of the Agreements but also, after the Agreements became effective, it was CPW which continued to carry on the Businesses as principal and the Businesses were not carried on by BBUK as principal through the agency of CPW. It follows that, on a realistic view of the facts:

In the light of the above conclusions, I do not consider that the analogies provided by Mr Gammie and described in paragraphs 96 to 98 above affect the conclusion in any way.

As regards the analogy in paragraph 96 above, I do not see how cases such as Trego and Stekel – which establish that, where persons are carrying on a business in common, ownership of the goodwill in the business can be owned by one of the partners to the exclusion of the others – shed any light on the present question for two reasons. First, those cases were not addressing the question of whether goodwill can be assigned without an accompanying transfer of the business to which the goodwill relates but the wholly different question of identifying the consequences of having disposed of, or failing to own, the goodwill to which the business relates. Secondly, and perhaps more relevantly, the partner owning the goodwill in those cases also carried on the business to which the goodwill related, which is to say the partnership business. The fact that another person carrying on the same partnership business had no interest in the goodwill of the business is not authority for the proposition that goodwill can be assigned to a person who acquires no interest in the business to which the goodwill relates.

Similarly, Adlem sheds no light on the question of whether goodwill can be assigned without an accompanying transfer of the business to which the goodwill relates. It too related to the wholly different question of identifying the consequences of having disposed of the goodwill to which the business relates. In Adlem, the sale of the goodwill by Mr Adlem had been accompanied by a sale of the business to which the goodwill related.

As regards the analogy in paragraph 98 above, that analogy falls away in the light of my conclusion to the effect that CPW continued to carry on the Businesses as principal on its own account and not as agent for BBUK. In Balloon, the fact that the franchisees covenanted not to compete with the franchisor was held to indicate that the franchisees had assigned goodwill to the franchisor. In this case, the conclusion I have reached that CPW did not agree to carry on the Businesses as agent for BBUK but continued to do so as principal on its own account means that there is no parallel to be drawn between the present case and the facts in Balloon.

In dealing with Issue Three, I have deliberately avoided any consideration of whether, because BBUK was required to pay interest to CPW out of the amounts that it received under clause 5 of the MSA, on a realistic view of the facts, CPW retained significantly more than 95% (or 91.19%) of the gross revenues of the Businesses after the Agreements became effective. I do not need to address that question in order to determine this appeal. However, for the reason I mention in dealing with Issue Seven below, it is potentially relevant in determining the tax consequences of the transaction which was effected by the Agreements and I will therefore return to this point when I address Issue Seven.

The terms of the conclusion I have reached above in relation to Issue Three effectively mean that Issue Four and Issue Five fall away. However, for completeness, I will set out the submissions which were made by the parties, and my conclusions, in relation to each of those issues.