UT-2023-000116; - [2025] UKUT 00164 (TCC)

As already discussed, the FTT decided that Nellsar’s corporation tax amortisation allowances in respect of goodwill should be recomputed as if Nellsar had drawn up GAAP-compliant accounts where the acquisition price for the properties was based on market value, adjusted by special assumptions: FTT [218].

In the next paragraph (FTT [219]) the FTT said:

“219.

We should emphasise that in saying this, we are not laying down any particular assumptions or adjustments that we consider should apply in preparing the revised valuations – that is a matter of professional valuation opinion upon which the Lands Chamber of the Upper Tribunal will in due course, if necessary, adjudicate when it comes to determining actual valuations.”

However, in the immediately following paragraph (FTT [220]), effectively the paragraph which causes HMRC concern, the FTT said:

“220.

In view of the agreement referred to at [10] above [i.e. as to the role of the FTT – see paragraph ‎70 above], therefore, our decision is limited to stating that in valuing the properties in question, the method to be adopted is to value them pursuant to paragraph 9(a) of FRS7 on the basis set out in the RICS guidance referred to above, but in accordance with FRS6 & 7 valuing only the “identifiable asset” in each case, i.e. assuming there to be no current staff, residents, contracts, permits or other accoutrements of a business and excluding any chattels which, as a matter of real property law, did not form part of the land at the time of Nellsar’s purchase.”

HMRC’s concern is that if the second part of FTT [220] is taken literally as requiring a special, counterfactual, assumption that there are “no current staff, residents, contracts, permits or other accoutrements of the business” and no chattels available, then this was an error of law. HMRC did recognise, however, that this paragraph may simply be repeating the uncontentious point that what must be valued is only the “identifiable asset” i.e. the land and building, without any other asset or accoutrement, rather than mandating the counterfactual assumption that the care homes were effectively closed and there were no chattels, staff etc. If understood in this latter sense, HMRC took no issue with FTT [220].

If, however, the FTT in FTT [220] was laying down counterfactual assumptions for the purposes of the valuations for corporation tax purposes, then HMRC in their second ground of appeal considered that that error also affects the FTT’s conclusions on SDLT.

If we dismiss Nellsar’s grounds of appeal and conclude that the fair value of the properties should be based on “market value” pursuant to FRS 7.9(a), then Nellsar submitted that HMRC’s appeal should be dismissed on both grounds.

Having reviewed FTT [220] carefully, we consider that the FTT was simply emphasising the point that the asset which must be valued is merely the “identifiable asset”. Paragraph 9(2) of Schedule 4A to CA85, which sets out “the acquisition method of accounting”, requires that:

“The identifiable assets and liabilities of the undertaking acquired shall be included in the consolidated balance sheet at their fair values at the date of acquisition. In this paragraph the “identifiable” assets or liabilities of the undertaking acquired means the assets or liabilities which are capable of being disposed of or discharged separately, without disposing of a business of the undertaking.”

In our view, the second half of FTT [220] is governed by the words “valuing only the “identifiable asset” in each case, i.e. assuming there to be”, which strongly indicate that the words that follow simply define the identifiable asset.

We have already referred to the decision of this Tribunal in Marlborough. That decision also summarised the case law, which we did not understand to be in dispute, concerning the way in which an appellate court should consider a judgment which is under appeal:

“80.

Before examining the disputed passages of the Decision and the transcript of the hearing before the FTT, we should record that it was common ground that the authorities established a number of propositions. First, was the proposition that the Decision had to be read fairly and as a whole, not picking upon individual passages in isolation. Secondly, the FTT was under no obligation to deal with every submission or piece of evidence – to conclude otherwise would place an intolerable burden on the fact-finding tribunal. It was necessary only to deal with relevant evidence and submissions. Moreover, the mere fact that the FTT does not refer to a piece of evidence does not mean that the evidence was overlooked or ignored. Thirdly, there was a presumption that if the FTT correctly sets out the law it can be taken to have applied it correctly. Obviously, mistakes can be made and if it can be shown that the FTT did not apply the legal test correctly that presumption can be rebutted.”

Read in context, we are clear that the second part of FTT [220] is simply referring to the identifiable asset. Having said in FTT [219] that it was not laying down assumptions to be applied by the Lands Chamber of the Upper Tribunal, to decide that it then contradicted itself in the very next paragraph of an otherwise carefully reasoned and meticulous decision would be a strange conclusion, which of itself suggests that it cannot be correct. As the Court of Appeal  said recently in A Taxpayer vHMRC [2025] EWCA Civ 106:

“It is well established that reasons given for a decision can always be better expressed, but that judgments and decisions should be read on the assumption that judges and tribunals know what they are doing unless they have demonstrated the contrary. In the same way I think a decision such as that of the FTT here should be read on the assumption that the FTT intended it to be rational, coherent and consistent unless one is driven to the conclusion that it cannot be so read.”

Accordingly, we consider that HMRC’s concerns regarding FTT [220] are unfounded and that their appeal on both grounds can be dismissed on the basis we have indicated.