Postmaster terminated

The taxpayer purchased a stationery store and post office in 1987 for £110 000 £60 000 of which was allocated to the property £45 000 to goodwill and £5 000 to fixtures and fittings.

Under the “network reinvention” plan the Post Office offered compensation to sub-postmasters willing to close their branches which in the taxpayer’s case equated to 28 months of remuneration.

The branch closed in 2008 and £73 851 was paid out £30 000 of which was exempt under ITEPA 2003 s 403(1) while the balance was charged to tax.

The taxpayer claimed the £45 000 goodwill in his 2008/09 return as a balancing allowance. This created a loss claimed against other income resulting in a repayment of £9 000.

HMRC enquired into the return and contended there was a capital loss. The taxpayer’s accountants argued it was a revenue...