CG12000 - Chargeable assets: intangible assets: rights
Under , all forms of property, whether situated in the UK or not, are assets for Capital Gains Tax purposes. We must identify two characteristics when deciding whether a right is a chargeable asset:
路听听听听听听听听 it must be something which is capable of being owned and
路听听听听听听听听 its value must be capable of being realised.
These essential characteristics have been considered by the courts in deciding whether certain types of intangible 바카라 사이트渞ights바카라 사이트� are assets for capital gains purposes. Unless a right possess both characteristics it is not property, so it cannot be an asset for capital gains purposes.
Capable of being owned
We must distinguish 바카라 사이트榬ights바카라 사이트� from 바카라 사이트渇reedoms바카라 사이트� when deciding whether something is capable of being owned. Unlike rights, freedoms are not capable of being owned, so are not assets.
The difference between rights and freedoms was established in the tax case of听Kirby v Thorn EMI plc 60TC519
In this case, a subsidiary of Thorn EMI plc disposed of shares in some of its own subsidiary companies. As part of the sale agreement, Thorn EMI plc entered into a covenant with the purchaser in which it agreed that during the next five years, no member of the Thorn Group would compete with the purchasing company.
Thorn EMI plc said that as the covenant related to its freedom to trade, the consideration received for entering into the covenant did not derive from any asset. The courts accepted that a person바카라 사이트檚 freedom to trade was not a form of property and therefore not an asset for capital gains purposes because the words 바카라 사이트渁 form of property바카라 사이트� in must take their normal legal meaning of something which is capable of being owned. The court held that the restrictive covenant was not the source of the capital sum because it was not owned by the company immediately prior to the disposal.
But, although Thorn EMI plc had entered into a restrictive covenant which affected its freedom to trade, the Court did not consider that the whole of the consideration had derived from that. Entering into the covenant directly impinged on Thorn EMI plc바카라 사이트檚 goodwill. The consideration included a capital payment derived from this goodwill. The case was returned to the Special Commissioners to allow them to consider further arguments.
In the absence of any binding decision on this point, HMRC바카라 사이트檚 view is that the existence of such a covenant and payment shows that the covenanter did own goodwill. The sum received would be chargeable to Capital Gains Tax unless the covenanter could show that such goodwill was absent.
Value is capable of being realised
The meaning of 바카라 사이트渞ealising value바카라 사이트� from an asset was considered in听O바카라 사이트橞rien v Benson바카라 사이트檚 Hosiery (Holdings) Ltd 53TC241. In that case, a director paid a company 拢50,000 to be released from his contract of service. The company claimed that its rights under the contract of service could not be a chargeable asset because they could not be assigned or otherwise turned to account.
This argument was rejected in the House of Lords. The Court held that the bundle of rights to which the company was entitled under the terms of the contract was a form of property and, therefore, an asset within because the company owned them, and they could be, and had been, turned to account.
The House of Lords held that a capital sum was derived from a company바카라 사이트檚 rights under an employment contract even though its ability to turn those rights to account was limited by the nature of the asset. We take the phrase 바카라 사이트渞ealising value바카라 사이트� to mean turning the ownership of the asset to account by obtaining consideration from it.
This idea of an asset as something which can be turned to account has guided the courts in later decisions but must be applied with caution.听 If an asset is to be understood by analogy with property it follows that it must be capable of being owned. itself refers to 바카라 사이트渢he owner바카라 사이트� of an asset as the person deemed to make a disposal.听 In this respect a distinction can usefully be drawn between 바카라 사이트渞ights바카라 사이트�, which may be assets and 바카라 사이트渇reedoms바카라 사이트�, which are not.
In certain circumstances it may be possible for a person to realise value from an asset which they no longer own, see听CG12975.
Different types of rights
Where a person appears to have either disposed of a right or derived a capital sum from his ownership of a right it is essential that the precise type of 바카라 사이트渞ight바카라 사이트� involved in the transaction is identified, as not all rights are capable of being assets for chargeable gains purposes.
Some 바카라 사이트渞ights바카라 사이트� can be disposed of by transfer or assignment to another person but more commonly there will be an occasion of a disposal when a capital sum is derived from a right, see听CG12990+.
When you consider rights as assets for capital gains purposes, you need to know the type of rights you are dealing with so that you can apply the correct tax treatment. The rights could be:
路听听听听听听听听 statutory rights, that is certain rights granted by an Act of Parliament, seeCG12995
路听听听听听听听听 contractual rights, that is rights granted under the terms of a contract, seeCG13000
路听听听听听听听听 rights of action, that is rights to take action for compensation or damages, see听CG13015
路听听听听听听听听 rights to deferred consideration, see CG14850+
Other examples of rights to payment that could not give rise to Capital Gains Tax liability would be a right to a tax repayment or a right to payment of costs after successful litigation.