The taxpayer company’s entire shareholding in Borelli Tea Holdings Ltd were sold to another company M.
At the time the company had a 70% shareholding in Williamson Tea Assam a company incorporated in India.
HMRC agreed that the sale of shares in Borelli attracted the substantial shareholdings exemption under TCGA 1992 Sch 7AC.
The share sale agreement included a non-competition agreement with M for which M paid the appellant more than £3.7 million. HMRC treated this payment as a capital sum for the part-disposal of the appellant’s goodwill.
However the taxpayer company in its corporation tax return showed the amount as not taxable. It claimed that the non-competition agreement had been an artificial device to enable M to pay a lower price to the minority shareholders.
There was never any intention to compete with M after the...
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