The main issue in this case was the meaning of “market value” for the purposes of CTA 2010, s. 1020. It was also necessary to identify the “new consideration”. The case was technically a cross-appeal as the taxpayer also appealed against part of the earlier judgment.
The Upper Tribunal (UT) held that the First-tier Tribunal (FTT) had materially erred in law. The UT therefore set aside the earlier decision and itself determined the market value of the benefit received by the taxpayers.
The reasoning was summarised as follows in para. 50 of the judgment:
“There is no evidence suggesting that the parties did not consider and intend £1,199,043 to be the value of the promise. The promise arose as a result of the agreement by the taxpayers to transfer the goodwill to HFPL. The amount agreed to be paid was arrived at as a result of a third-party valuation of the goodwill. The promise was objectively recorded in the agreement for sale as being payable in cash or payable on demand as a debt. Additionally, HFPL credited the amount of £1,199,043 to the directors’ loan account. There was no evidence to suggest that the promise was not genuine or that the parties did not intend for the amount to be paid.”
According to the UT, “the market value is the value to the member (who in this case does not require immediate payment) of a genuine promise to pay, objectively evidenced, in circumstances where the member has every expectation that the promise would be honoured.”
Other proposed approaches to the valuation contained a “fundamental problem” and could lead to an “absurd” outcome.