Goodwill belonged to the individuals rather than the company

In 1999 Simpsons Independent Financial Advisors Ltd (SIFA) was incorporated. The taxpayers were appointed directors. In 2012 under a business transfer agreement the business of SIFA was transferred to SWM a limited liability partnership (LLP) in which the taxpayers become partners. The agreement provided for the transfer as a going concern and included all assets used in the business including the goodwill trade name and customer lists.

The value of the assets was shown in the taxpayers’ capital accounts as introduced by each taxpayer including substantial sums for goodwill.

HMRC said the goodwill shown as having been contributed by the taxpayers was goodwill that must have belonged to SIFA. It raised discovery assessments on the basis that the amounts were distributions from SIFA to each taxpayer.

The taxpayers appealed. They said the goodwill contributed by the taxpayers had never belonged to SIFA so it...