A Business Adviser pays a subscription of £8,000 on joining a business network. For this, he receives a distance learning course and reference manual, a five day residential course on business advising and sales training, and access to a network of other advisers with different specialisms. There is a mass email system, an internal email network for all advisers, and a website offering various resources, information and a discussion forum. Monthly workshops are available to network members, and although there is an annual subscription of £140, this would probably not cover the expense of the workshops and access to the network, so one might assume that the initial subscription is partly used towards this.
But what is being paid for with the £8,000? It does not seem to be know-how because it is outside the definition in S.452 CAA 2001. Is it a licence? I know of a case where an individual has persuaded the Revenue that it was a revenue training expense, but certainly more recently the Revenue has successfully argued before the General Commissioners that it was purely a capital expense (presumably following the Atherton case). The taxpayer was not represented by a professional in this case, and had only just started to trade when he spent his money. I am not sure whether it would matter whether the individual paying his £8000 was trading through a company or otherwise, though one could see there would be a better chance of a revenue deduction if the trade had been established for some time when the payment was made.
My feeling is that if the sum paid is of a capital nature then it is not one where the tax treatment is entirely clear. Is it the type of intangible asset which can be written off over its useful life (whatever that is) in accordance with FRS 10? I am no expert on technical accounting matters.
Help, please!
Jon Stow
Replies (3)
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If it sounds like a duck
John
This looks similar to many such arrangements, franchises etc. The treatment of the £8,000 in the hands of the recipient will presumably have been established with their HMIT and, whilst the payer's tax position may not mirror it, there should be some help here. I have seen instances where the vendor has agreed the tax treatemnt of his customers with the Revenue in advance, and even included this in the sales literature.
Good luck,