Colley and Hillberg v Clements

The case concerns the validity of a claim for hold-over relief

Sp C [2005] SSCD 633 (Sp C 483)

Two individuals carried on a trade through a partnership and incorporated their business.

The company subsequently submitted accounts indicating that it paid £250,000 for the goodwill of the partnership business, despite the fact the neither of the partners had declared such a disposal on their personal tax returns.

The Inland Revenue issued amendments to their self-assessments, charging capital gains tax on the disposals of goodwill.

The taxpayers appealed, claiming that they were entitled to retirement relief, but this was denied on the grounds that they were below the statutory age.

Their accountants then claimed that the original company accounts had been incorrect and that they had 'gifted' the goodwill to the company and claimed hold-over relief accordingly.

The special commissioners rejected the appeal and, on the evidence provided, held that the transaction should be treated as a transfer of goodwill at market value of £250,000.

The revision to the accounts took place only after queries had been raised about the earlier accounts by the inspector. The commissioners observed that 'accounts cannot be re-written at a whim'.

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