HMRC criticised by judge for attempt to alter argumentby
The judge criticised HMRC’s attempt to change its ‘case stated’ arguments by the back door over issues that had been resolved in two earlier tax enquiries.
The decision in Roger Preston Group Ltd v HMRC (TC08025) considers the definition of an intangible fixed asset (IFA) and the important difference between an IFA and a financial asset. HMRC’s conduct in the case, and the performance of its expert witness are also noteworthy.
The players in the story were:
- J Roger Preston and Partners (JRP), a partnership of consulting engineers.
- Roger Preston and Partners Ltd (RPPL), a company set up and by JRP and wholly owned (prior to the sale) by the individual partners of JRP.
- Roger Preston Group Ltd (RPGL), the appellant and the company in the Grontmij NV group which purchased the assets and business of JRP in 2008.
- Grontmij UK (GUK), the company in the Grontmij NV group which purchased the shares of RPPL in 2008.
JRP carried on a business of consulting engineers in the UK and also in Hong Kong, Germany, Poland and the US. In 1994, the then partners decided that the UK trade should be carried on by RPPL, which was wholly owned by the individual partners. There appears to have been good contemporaneous evidence as to the commercial rationale for this planning.
As part of the structuring in 1994, JRP granted RPPL a licence to use the designs and logos; the premises, fixtures and fittings etc; the client data; and the business know-how. JRP undertook to provide assistance and advice to RPPL to help it carry on the business and service clients.
An annual fee was payable for this assistance calculated by reference to the hours provided by JRP to RPPL and RPPL’s gross turnover, capped at 95% of RPPL’s annual pre-tax profit.
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I am an independent specialist adviser on the taxation of innovation, advising companies and other advisers on areas such as R&D tax relief, Patent Box and Creative Industry reliefs, as well as IP tax issues more generally.
Formerly a Tax Partner with KPMG LLP (UK), I left in 2011 to establish Aiglon Consulting.