TC09562 - [2025] UKFTT 00762 (TC)

Issue One – applicability of the authorities in relation to statutory construction

Mr Gammie said that determining whether CPW had effected a disposal of the Goodwill in this case was merely a matter of contractual construction – determining the legal rights and obligations to which the Agreements gave rise.

Mr Brinsmead–Stockham, on behalf of the Respondents, said that determining whether CPW had effected a disposal of the Goodwill in this case was ultimately a matter of statutory construction – determining whether, construing Section 179(3) purposively, the facts, viewed realistically, meant that CPW continued to hold the Goodwill at the time of the Degrouping. Although the legal rights and obligations to which the Agreements gave rise were of some significance in this process, they were not determinative;

Issue Two – the scope of the rule prohibiting assignment “in gross”

Mr Gammie said that, as long as an assignee of goodwill was able to turn the goodwill to account – for example, because it had the right to carry on the business to which the goodwill related – and there was no likelihood of deception, the assignment would not be an assignment “in gross” and would be valid in law. The validity of the assignment did not depend on its being accompanied by a transfer of the business to which the goodwill related.

Mr Brinsmead–Stockham said that, on the contrary, in order for an assignment of goodwill not to be invalid in law as an assignment “in gross”, it needed to be accompanied by a sale of the business to which the goodwill related;

Issue Three – ownership of the Businesses following the execution of the Agreements

Mr Gammie said that the effect of the Agreements was that BBUK became entitled to carry on the Businesses so that, thereafter, the Businesses were no longer being carried on by CPW as principal for its own account but were instead being carried on by CPW as agent for BBUK and for BBUK’s account. That equated to a transfer of the Businesses by CPW to BBUK.

Mr Brinsmead–Stockham said that, when the facts were viewed realistically:

Issue Four – assignment in equity

Mr Gammie said that, even if CPW’s agreement to sell the Goodwill was invalid in law because it was an assignment “in gross”, the sale nevertheless took effect in equity so that, after the Agreements became effective, CPW held the Goodwill on bare trust for BBUK and was no longer the beneficial owner of the Goodwill.

Mr Brinsmead- Stockham said that, since, viewed realistically, the effect of the Agreements was to leave the Goodwill and the Businesses with CPW, there was no basis for concluding that the parties had intended the Goodwill to be assigned to BBUK and therefore there was no reason for equity to intervene to fulfil the parties’ purpose. In addition, if the sale of the Goodwill had failed in law because it was an assignment “in gross”, the same principle – to the effect that an assignment of goodwill “in gross” was invalid because it was inherently deceptive and offended against public policy – applied in equity;

Issue Five – not the same asset

Mr Gammie said that, even if CPW continued to own the Goodwill after the Agreements became effective, the Goodwill which it owned was not the same asset as that which it had acquired from the Vendor Companies because it was precluded by the terms of the Agreements from either carrying on the Businesses itself or turning the Goodwill to account in any way. Thus, no charge under Section 179(3) could arise.

Mr Brinsmead–Stockham said that, viewed realistically, the effect of the Agreements was to leave the Goodwill and the Businesses with CPW and therefore, after the Agreements became effective, CPW was perfectly capable of carrying on the Businesses and turning the Goodwill to account. It followed that a charge under Section 179(3) could arise in respect of the Goodwill;

Issue Six – the relevance of the transaction effected by Agreements in the event that Section 179(3) applied

Mr Gammie said that, even if a charge under Section 179(3) did arise, before the present appeal could be finally determined, it was necessary to take into account, pursuant to Section 179(13) of the TCGA 1992, the effect on the tax consequences of the transaction which had been effected by the Agreements of the deemed disposal and re–acquisition under Section 179(3).

Mr. Brinsmead–Stockham said that, if I were to conclude that a charge under Section 179(3) arose, that was sufficient to determine this appeal, because this appeal was against the PCN, which related solely to that charge. Any impact of that charge on the tax consequences of the transaction which had been effected by the Agreements was something to be determined in due course; and

Issue Seven – the tax consequences of the transaction effected by Agreements in the event that Section 179(3) applied

Mr Gammie said that, if I were to conclude that a charge under Section 179(3) arose, then the transaction which had been effected by the Agreements was properly to be regarded as amounting to a part disposal of the Goodwill under Sections 21 and 22 of the TCGA 1992 and that part disposal would have given rise to an allowable loss in the same accounting period as that in which the chargeable gain under Section 179(3) had arisen of an amount equal to the difference between the value of the Goodwill at the time when it had been acquired by CPW from the Vendor Companies and the value of the Goodwill at the time of the part disposal. Accordingly, the net chargeable gain that had arisen in the accounting period in which CPW left the CPW Chargeable Gains Group was equal to the amount which had been paid to CPW under the SPA.

Mr Brinsmead–Stockham said that the transaction effected by the Agreements had not given rise to a part disposal of the Goodwill because, viewed realistically, the payment made by BBUK under the SPA was simply consideration for the right to receive payments equal to a fixed percentage of the future gross revenues of the Businesses. Furthermore, even if the transaction had given rise to a part disposal of the Goodwill, the Appellant had not adduced any evidence to show that the result of applying the chargeable gains rules was that the part disposal would have given rise to an allowable loss in the amount claimed by Mr Gammie.