Tribunal confirms licence to use client list qualifies for fixed asset amortisation

In Ripe Limited v HMRC [2025] UKFTT 1606 (TC), the First-tier Tribunal (FTT) held that a licence to use a client list constituted an intangible fixed asset (IFA), entitling the company to amortisation relief under what is now parts 8 and 9, Corporation Tax Act 2009 (CTA 2009).

Background

In May 2007, Mr Robert Glazer and Mrs Pratima Glazer ceased to be partners in Glazers Chartered Accountants (Glazers CA), a general partnership. The terms of Mr Glazer's exit from Glazers CA became a source of dispute with the other partners in Glazers CA.

Following arbitration concerning a non-compete clause in the partnership agreement relating to Glazers CA, Mr Glazer was permitted to acquire a licence to use the firm's client list for consideration of £555,271 (the Licence).

On 19 April 2007, Mr and Mrs Glazer incorporated Ripe Limited Liability Partnership (Ripe LLP) with themselves as the only members to operate the new accountancy business and on 24 April 2007 Ripe Limited (Ripe) was incorporated. Ripe is owned by Mr and Mrs Glazer, who are its only directors.

Mr Glazer transferred the Licence to Ripe and Ripe LLP paid Ripe a fee to use the client list.

Ripe recorded the Licence in its accounts as 'goodwill' and claimed annual amortisation deductions of £50,000, under the IFA regime (now in parts 8 and 9, CTA 2009).

HMRC contended that no IFA had been acquired and considered Ripe had been 'careless', for the purposes of the extended six year time limit. Accordingly, HMRC issued discovery assessments and closure notices to Ripe, disallowing the amortisation deductions for six different accounting periods. Ripe appealed to the FTT.

FTT's decision

The appeal was allowed.

In reaching its decision, the FTT found that the Licence was acquired by Ripe for continuing use in the course of its business and Ripe maintained necessary control over its expected future benefits – the licence therefore constituted an IFA and qualified for amortisation relief.

Although the Licence was not documented and was incorrectly described as 'goodwill' in the company's accounts, this did not alter the fact that it was, in substance, an IFA for corporation tax purposes. 

The FTT also found that no loss of corporation tax had been brought about by careless conduct by the company and therefore the extended six year time limit relied upon by HMRC did not apply (paragraph 46(2), Schedule 18, Finance Act 1998). Two of the four discovery assessments had been issued outside the four year time limit and were therefore invalid in any event (paragraph 46(1), Schedule 18, Finance Act 1998).

Comment

This decision provides a helpful reminder that the tax treatment of an asset will often depend on its substance rather than its form. The fact that the Licence was not documented and was incorrectly described as 'goodwill' in the accounts of the company was not determinative.

It would no doubt have saved a great deal of time and expense if the Licence had been carefully documented at the time it was granted, but the FTT was nevertheless satisfied that both the Licence and its assignment existed, based on the witness evidence relied upon by Ripe. 

Finally, although this decision is a helpful illustration of some of the basic principles applicable to the taxation of IFAs, it should be noted that the rules for taxing goodwill and customer-related IFAs have changed significantly since the events considered by the FTT in this case.

The decision can be viewed here.