Mertrux - UK Upper Tribunal reverses a broad interpretation given to "goodwill"

The additional amount received by a Mercedes dealer for the early termination of its dealership was found to be consideration for the surrender of a contractual right (giving rise to capital gains treatment) rather than for goodwill (for which rollover treatment was available) - notwithstanding that Daimler-Chrysler (UK) Ltd. arranged for this additional amount to be paid directly to the dealer by the third party purchaser of the dealership.

This case could be relevant to the interpretation of s. 167.1 of the Excise Tax Act (no GST on the consideration for the purchase of a business or business division that is attributable to goodwill) and also to the Canadian income tax distinction between a capital gain and an eligible capital amount - although it is hard to be sure about the latter point because following some amendments to get rid of the "mirror image rule" (see Toronto Refiners) that distinction now is utterly circular: under ss. 14(1) and 14(5) - CEC-(E), an eligible capital amount is 1/2 of an amount receivable on capital account in respect of a business that is not included in computing a capital gain; and under s. 39(1)(a)(i), a capital gain does not include gain from the disposition of an eligible capital property!

Neal Armstrong.  Summaries of R & C Commrs v. Mertrux, [2012] UKUT 274 (Tax and Chancery Chamber) under s. 14(5) - CEC (E) and ETA, s. 167.1.