Villar v Revenue & Customs (INCOME TAX/CORPORATION TAX : Appeal) [2019] UKFTT 117 (TC) (21 May 2018)

Villar v Revenue & Customs (INCOME TAX/CORPORATION TAX : Appeal) [2019] UKFTT 117 (TC) (21 May 2018)

The Tribunal found as a matter of fact that the Appellant sold his business, including goodwill and business assets, to Spire for £1m. The transaction was a genuine sale of a going concern, not merely an exploitation of earning capacity. The payment was therefore capital in nature and not subject to income tax. The anti-avoidance provisions in Chapter 4, ITA 2007, did not apply as the arrangements were not made to exploit earning capacity or to avoid income tax.

Citation
[2019] UKFTT 117 (TC)
Parties
Appellant: Richard Villar; Respondents: The Commissioners for Her Majesty’s Revenue & Customs
Jurisdiction
United Kingdom
Judgment Date
21 May 2018
Procedural Posture
Income Tax/corporation Tax Appeal / First Tier Tribunal (tax Chamber) Substantive Decision
Outcome
Appeal allowed
Legal Topics
Income Tax, Capital Gains Tax, Goodwill, Sale of Business, Entrepreneur’s Relief, Anti Avoidance, Characterisation of Receipts
Tax Law Income Tax Capital Gains Tax Goodwill Sale of Business Entrepreneur’s Relief Anti Avoidance Characterisation of Receipts

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Parties

Richard Villar

Appellant

The Commissioners for Her Majesty’s Revenue & Customs

Respondents

Procedural Posture

Income Tax/corporation Tax Appeal / First Tier Tribunal (tax Chamber) Substantive Decision

Legal Issues

  1. 1 Whether the £1m payment received by the Appellant was capital or income in nature for tax purposes
  2. 2 Whether the payment, if capital, should nonetheless be taxed as income under Part 13, Chapter 4, Income Tax Act 2007

Ratio Decidendi

The Tribunal found as a matter of fact that the Appellant sold his business, including goodwill and business assets, to Spire for £1m. The transaction was a genuine sale of a going concern, not merely an exploitation of earning capacity. The payment was therefore capital in nature and not subject to income tax. The anti-avoidance provisions in Chapter 4, ITA 2007, did not apply as the arrangements were not made to exploit earning capacity or to avoid income tax.

Court Disposition

Appeal allowed

Orders

  • The £1m payment is to be treated as a capital receipt, not income.
  • The amendments and assessments to treat the payment as income are set aside.