In County Insurance Services Limited v HMRC [2025] TC09697, the First Tier Tribunal (FTT) found that amortisation relief was not available on goodwill following a partnership's incorporation.
Malcolm Sydenham (MS) set up County Insurance in 1984, later joined by Anna Sydenham (AS) in 1989 and Tim Sydenham (TS) in 2001.
- Initially, the partnership operated as Independent Financial Advisers (IFAs), offering life assurance, mortgage advice and investment products.
- Over time, it expanded into personal and commercial insurance, including niche products like thatched property insurance.
- By April 2002, the business mix was approximately 55% IFA, 30% personal insurance and 15% commercial insurance.
- In 2006, significant changes occurred:
- The IFA arm was sold for £127,800, and regulatory permissions were withdrawn.
- The business relocated from a high street office to a larger premises in a business park in 2007.
- Focus shifted to specialist insurance schemes and wholesale brokerage.
- Despite these changes, turnover remained stable:
- 2005: £582,989.
- 2006: £642,536.
- 2007: £655,306.
- 2008: £695,295.
- The partnership Incorporated in 2013, when its business primarily comprised commercial insurance (69%), household schemes (12%) and personal insurance (19%). MS and TS became directors and shareholders of the company.
- Goodwill was valued at £1.32 million on incorporation, and amortisation was claimed in County Insurance Services Limited's (CISL's) Corporation Tax returns for periods ending 31 March 2014 to 2021.
- HMRC issued Closure notices and Assessments totalling £107,456, contending that the goodwill fell outside the Intangible fixed assets regime in Part 8 of the Corporation Tax Act 2009 (CTA 2009).
- The central question was whether the business acquired by CISL in 2013 had been carried on by a predecessor partnership before 1 April 2002.
- Under Section 884 CTA 2009, goodwill is treated as created before 1 April 2002 if the business was carried on at any time before that date by the company or a related party. If so, the goodwill falls outside the intangible fixed asset regime, and amortisation is not deductible.
- CISL contended that the post-2006 business was fundamentally different from the pre-2002 business, meaning the goodwill should have been treated as created after 1 April 2002. CISL argued that:
- The cessation of financial advice and the sale of the IFA arm marked a break from the previous trade.
- Moving from a high street retail model to a business park and adopting wholesale brokerage represented a new framework.
- The business transitioned from retail advice to designing niche products for brokers, targeting a national market rather than local individuals.
- CISL relied on case law, Seaman v Tucketts, Netlogic Consulting, Gordon & Blair, Rolls-Royce Motors, to argue that these changes amounted to a cessation of the old trade and the start of a new one.
- HMRC argued that the business continued in an evolved form.
- While activities and premises changed, the core function of selling insurance remained.
- HMRC characterised the changes as organic growth rather than a fundamental break. The goodwill was therefore created before April 2002, and amortisation relief was unavailable.
- CISL Appealed HMRC's decision.
The First Tier Tribunal (FTT) found that:
- Businesses naturally evolve; changes in products, premises and marketing do not necessarily indicate cessation.
- The disposal of the IFA arm was gradual and foreseeable, driven by retirements rather than a strategic overhaul.
- Relocation was due to a landlord notice, not a deliberate termination of trade.
- Wholesale brokerage and niche products reflected diversification, not a sudden and dramatic change.
- Turnover and staffing remained broadly stable, undermining claims of a radical transformation.
- These facts contrasted with cases involving abrupt, large-scale changes (e.g. Rolls-Royce); CISL's evolution was incremental and organic.
- The business acquired by CISL in 2013 was the same business carried on before 1 April 2002.
- The goodwill was therefore created before 1 April 2002 and fell outside the intangible fixed asset regime.
The appeal was dismissed.
Useful guides on this topic
Goodwill and the intangibles regime
How does the Corporation Tax intangible regime work? What is the treatment of goodwill for Corporation Tax? Do companies account for goodwill differently?
Incorporation Goodwill & incorporation: Tax issues
What are the tax issues concerning Intangible Property (IP) assets, such as goodwill, on incorporation? What tax reliefs apply if you buy and sell goodwill and IP? What are the valuation and clearance procedures?
Incorporation Valuation: Goodwill
What valuation methods are suitable for valuing a business? What are the issues with goodwill and other intangibles? What does HMRC suggest? What do the courts think?
External link