Payment for asset transfer was a distribution

In 2007 Jasper Conran the fashion designer expanded his design range into branded eyewear. A limited liability partnership (LLP) (JCO) was formed with Mr Conran as a controlling member. It entered into a licensing agreement with Specsavers for the design manufacture and sale of spectacle frames branded with the trademarked name ‘Jasper Conran’.

In 2008 the business of JCO was transferred to JC Vision Ltd. Mr Conran subsequently received £8.25m which he treated as a capital gain and paid capital gains tax. JC Vision treated the sum as a business expense which it amortised in its accounts and claimed intangibles relief (FA 2002 Sch 29).

HMRC considered the open market value of the assets transferred was overstated and revised the figure to £1. Therefore no intangibles relief arose. It also considered that the payment of £8.25m to Mr Conran was a distribution (TA 1988 ...