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I am not surprised HMRC lost. It can certainly be hard to decide what is a one person business with value eg when my doctor father died we had to consider if there were any residual value - none in his case as although work still kept coming in he had stopped work 2 year before; but here Spire were prepared to pay to buy it. They would not have done that if there were no value for goodwill.
It is also extremely normal for small business sellers to be required to take on a consultancy after the sale and indeed they often want to, for at least a year or two and it would be very surprising if that meant HMRC did not feel the business had been properly sold.
I can see that in a different case where the buyer is owned by persons connected to the seller of course that would be a different matter, but that was not the case here.
Where a junior colleague or partner buys out an older one and the older keeps working moving to being an employee/consultant that does not remove the fact the younger has bought goodwill and the sale proceeds are capital. It just means that the younger buyer wants a year or two to move the allegiance of the customers over and often a bit of time to be able to afford stage payments of a purchase price.
NHS practices are (for obvious reasons) specifically prevented from selling their practices for profit, whereas for private doctors there is no such restriction. I'm surprised that point was not mentioned in the case in support of the taxpayer, whose win was entirely unsurprising on the facts.
It's rare for me to be on HMRC's side but I think they missed a trick in their argument. Villar would have had to do some £4m's of work for Spire to recoup their £1m investment. One has to assume that they expected Villar to work for some years to earn this amount of income, even at the rate that insurers are willing to pay for such work.
There is a suggestion that Villar also worked outside the UK, as well as continuing his lecturing and other work. How did he find the time to earn this amount of income purely from operations?
If Villar were to have had reason to stop work very shortly after the agreement took effect how could the payment by Spire be considered to be goodwill, they would have been unlikely to recover their investment since patients would simply have used other consultants not necessarily working with Spire.
I suspect that Villar had other reasons for raising funds up front and this was a good way to do it. Personally I cannot see a good reason to treat this payment other than revenue income.
Anyway, well done to the taxpayer, you appear to have convinced everyone except me.
I agree with Terry Hyman. It was clearly uncommercial. He could have just walked away with the £1m. So there was something else going on and was not arguably a normal sale of business.
On purely technical grounds I agree with you. There are not differentiable assets other than the goodwill arising from the "Villar clinic". Which says it all really.
Is it me or is the article missing something at the end?
Regarding HMRC's position I find it difficult to understand why they thought that a business didn't exist. Did they try to understand what happened to the business post sale. If it continued to exist, as implied, then they were entitled to profits, were entitled to grow the practice by employing other surgeons and advertising their services etc, so the facts would show something changed hands i.e. a business. Not surprised they lost.