A speculative landfill and land consultancy counts as a business for capital gains tax (CGT) section 162 incorporation relief.

In Paul Roelich v HMRC TC03704 the taxpayer was a consultant who had come to specialise in land infill after running a property consultancy partnership with his wife. 

The nature of his work was speculative, he worked from home, disliked paperwork and he had speculated on several other deals before finding one that worked. 

He had not yet registered as self employed.

After chasing several unsuccessful opportunities he successfully negotiated a landfill contract with a company PV. At that stage his business activities comprised of the PV contract together with his ongoing speculative landfill consultancy which also involved negotiations over land in the Isle of Wight.

He was already a director of a company called Gloucester Limited (Gloucester) which was already involved in property investment activities. Following the illness of his fellow director the pair decided merge their activities and work together through Gloucester. It was agreed that Mr R would transfer the PV contract and his other consulting activities to Gloucester in return for 49% of the shares. 

Gloucester’s accounts showed the purchase as an intangible asset. The extra shares were valued at £523,363.

The taxpayer claimed tax relief from CGT on the disposal under s162 TCGA 1992: roll-over relief on the transfer of business (see CGT reliefs: disposal of a business). 

HMRC assessed CGT on the disposal, denying CGT incorporation relief arguing that there was no transfer of a business but only a transfer of an asset which was a future income stream arising from a contract negotiated with PV as a fee for the services of an individual. Further Mr R's activities were not capable of being “a business as a going concern” since activities which are speculative and isolated are such that there is no “going concern”.

 The taxpayer appealed.

 The tribunal noted that there is no definition of "business" for the purposes of s162, and concluded that there was real evidence that the merger involved an agreement for the entire business of the Appellant to be transferred with all its assets consisting of the PV contract and any other opportunities that would otherwise have arisen to the Appellant's Land Development consultancy business. It was a going-concern.


A tricky one for HMRC's officers because it seems that this case might have not gone to appeal had there been some detailed disclosure in the company's accounts. More difficulty for them arose in the fact that the taxpayer had not yet registered as self employed, however if you have never attempted to start a new business you might not fully understand the time and effort that goes into it and so to merely dismiss on-going activity as "speculation" could seem a tad harsh given that there was an actual contract already negotiated. As often happens the tribunal extracted the evidence from a good witness and built up a fuller picture of the activities undertaken: it's very hard for HMRC to do that in correspondence.

Another interesting factor here is that there are potential PAYE issues on this type of exercise - the issue of new shares to an existing director. HMRC was not interested in the valuation of the business transferred but, if for example, the business being transferred in exchange for shares was not worth anything like it was supposed and the company's shares were worth the amount disclosed the difference would be taxable under Part 7 ITEPA 2003 (employment related securities) and subject to income tax.  


Case report: Paul Roelich v HMRC [2014] TC03704

Our guidance: tax planning for s162 incorporation relief: CGT reliefs: disposal of a business