Rollover relief is due

In 2000 Daimler-Chrysler (UK) Ltd reorganised its dealership network by issuing notices to each of its dealers purporting to terminate their dealership agreements.

As a result of court proceedings the agreement was amended by a deed of variation and termination. Under the terms it was agreed that the dealership would end no later than 30 June 2003 unless the dealer opted for an earlier date.

The taxpayer entered into such an agreement in July 2001 agreed a cessation date of 30 June 2003 and became entitled to a 24-month territory release payment of £1 752 698. In its company tax return the taxpayer treated the payment as equating to goodwill.

HMRC considered the payment comprised two elements: a basic amount relating to goodwill and an enhanced sum reflecting compensation paid for early termination of the...