HMRC v N Pickles and another

In HMRC v N Pickles and another [2022] UKUT 253 (TCC) (20 September 2022) the UT found that on the incorporation of a partnership business in return for a promise to pay any distribution was required to be calculated by reference to that sale consideration and not by reference to the amount of cash ‘actually received’.

The taxpayers were two individuals who set up a company (HFPL) to incorporate a business they had carried on in partnership. HFPL purchased the business from the taxpayers and consideration of approximately £1.2m attributed to goodwill was left on loan account which the taxpayers were free to draw on. Following an HMRC enquiry a lower value of goodwill of £450 000 was agreed on which HMRC assessed the taxpayers to CGT. HMRC assessed the difference to income tax as a distribution. HFPL entered into administration with the taxpayers...

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