In The Leeds Cricket Football & Athletic Company Limited v HMRC  TC4486 the FTT found that cricket hospitality was a separable business from the Headingly Stadium with its own goodwill attaching: it was not merely an income stream anciliary to the land.
- In 2005 the company sold the freehold of the Headingley Cricket ground
- Prior to the sale the property was leased to Yorkshire County Cricket Club (YCCC) and the company carried on activities (‘the Cricket Business’) comprising of corporate hospitality, catering and advertising services. It employed 19 catering staff on stadium cricket days.
- After the sale YCCC licenced back the catering business to the Appellant for an annual fee.
HMRC argued that the cricket business was not capable of existence without the land, it was not separate business but income streams ancillary to the land. As such there was no Goodwill in relation to this income stream on the disposal of the land.
The company appealed to the First Tier Tribunal (FTT).
The FTT considered the issues: did the sale involve a disposal of a business with attached goodwill or was there only a disposal of land with attached income streams?
It found that:
- The Cricket Business had goodwill attached to it which had been generated over the years by hard work and effort.
- It had an established client base and reputation garnered over the years through a professional sales, marketing and delivery operation which would distinguish it from a similar, but newly established operation
It rejected HMRC’s submissions that adherent goodwill should be subsumed into the value of the property for two reasons:
- Splitting of goodwill into inherent and adherent goodwill is an artificial exercise lacking useful purpose.
- The evidence demonstrated that the Cricket Business could be purchased by another (possibly a competitor) and carried on at another location.
- The connection that the Cricket Business had was not with the land, per se, but with the staging of major cricketing spectacles there.
There were two elements to this case, whether goodwill was effectively part of a trade related property (the ground) or whether the catering activities were a separable business in their own right. They were, this has some similarities with the Balloon Promotions case, which HMRC also lost. Goodwill remains a troublesome topic for all tax professionals.
Useful guides on this topic
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Transfer of income streams
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