In Currys Retail Ltd v HMRC [2025] TC09562, the First Tier Tribunal (FTT) found that a degrouping charge arose on a company exiting a chargeable gains group.
Currys Retail Limited, a UK resident company previously known as The Carphone Warehouse (CPW), was a wholly owned subsidiary of The Carphone Warehouse Group (CPWG).
- Between 2004 and 2007, CPW acquired Goodwill from four different businesses within its group.
- The value of the goodwill acquired was £107,658,000.
- Under s.171(1) TCGA 1992, the intra-group transfers occurred on a 'no gain/no loss' basis.
- On 30 June 2008, CPW ceased to be a member of the group. Five days before CPW leaving the Group, CPW and Best Buy UK CP Ltd (BBUK), unrelated parties (at that time), entered into a Sale & Purchase Agreement (SPA) and a Management Services Agreement (MSA).
- The SPA provided for CPW to sell the right to carry on the business, and the goodwill (then valued at £50,800,000), to BBUK.
- The MSA provided for CPW to operate and manage the business on BBUK's behalf in return for a management charge of 91% of revenues.
- Although BBUK and CPW were unconnected at the time the agreements were made, they became connected a few days later.
- CPW filed its Corporation Tax return for the accounting period ending 31 March 2009 on the basis that no degrouping charge arose when it left the group.
- Essentially, CPW's view was that it no longer owned the goodwill at the time it left the group, due to its agreement with BBUK five days prior.
- HMRC opened an enquiry into the return, subsequently issuing a partial Closure notice on the basis that a degrouping charge had arisen, resulting in a tax liability of £30,144,240.
- CPW Appealed to the First Tier Tribunal (FTT).
S.179(3) TCGA 1992 provides that when a company leaves a chargeable gains group owning an asset that is not a trading asset, which it acquired from another member of the same chargeable gains group in the previous six years, the chargeable company is deemed to have disposed of and immediately reacquired the asset.
- The reacquisition is at market value at the time of the initial intra-group transfer.
- This, essentially, reinstates any gain that would have arisen had s.171(1) not applied.
The FTT found that:
- When considering whether the relevant statutory provision applied, a 'realistic view' should be undertaken.
- Legal rights and obligations under the SPA and MSA were significant but were not determinative in themselves; the surrounding picture must be considered.
- The businesses were not transferred to BBUK:
- The SPA did not provide for BBUK to take on any of the company assets, stock, liabilities or employees. Only goodwill was transferred to BBUK.
- CPW continued to control operations, carrying on business as normal. It did not do so as an agent for BBUK.
- CPW was responsible for expenses; BBUK was not required to reimburse or take any responsibility for expenses.
- For a transfer of goodwill to be effective, the assignment of the goodwill must be accompanied by a transfer of the business.
- An assignment of goodwill, not accompanied by a transfer of goodwill, is an assignment 'in gross' and is invalid.
- Based on a realistic view of the facts, the payment of £50,800,000 was for future gross revenues and not a consideration for goodwill or the businesses.
- CPW continued to be the owner of the goodwill, in both law and equity, when it left the chargeable gains group.
The appeal was dismissed.
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