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Payment is capital

26 April 2011
Issue: 4301 / Categories: Tax cases
David Howell (TC1048)

Under a partnership agreement the appellant received £55 000 from the partnership on his retirement.

HMRC said that £20 000 of the settlement represented the return of the appellant’s capital from the partnership and the remaining £35 000 was additional shares of profits.

The department issued discovery assessments under TMA 1970 s 29 for the years 1996/97 to 2003/04 allotting one eighth of the £35 000 as additional income for each of the years concerned.

The appellant agreed that £20 000 was the return of capital but said the balance was a capital sum paid in respect of the disposal of his share in the partnership. He said therefore the discovery assessments were invalid.

The First-tier Tribunal said that it was clear from the evidence that the business’s partnership...

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