Goodwill earnings

The taxpayer company formed part of the financial services division of a group of companies which provided an estate agency financial services and life assurance.

The taxpayer made an exclusive agreement with a life insurance company to provide customer information in return for an upfront payment of £25 million and said it surrendered a significant part of its goodwill in so doing.  Therefore the upfront payment should be treated as capital.

HMRC disputed the claim and the matter went to the First-tier Tribunal which decided the upfront payment constituted income and was liable to be taxed as part of the company’s profits.

The taxpayer appealed arguing that the tribunal had erred in law.

The Upper Tribunal said that by entering into the agreement the taxpayer had been making use of its goodwill to earn money both in the form...