2 Green Smile Limited & Anor v The Commissioners for HMRC
Decision date: 20 December 2022
Neutral citation: [2023] UKFTT 15 (TC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
This appeal concerned when a dental practice and its goodwill passed from a partnership to a newly formed company and whether an oral deal shortly before 1 December 2014 was effective. The Tribunal found there was an oral agreement to transfer the whole business, but that agreement was unenforceable as to the premises under the Law of Property (Miscellaneous Provisions) Act 1989 because it was an indivisible transaction including land. On the facts, however, the company stepped into the partnership’s business as a de facto transfer on 1 December 2014, so the company was entitled to amortise the goodwill and income from that date; HMRC’s later 23 October 2015 date was rejected and the appeals were allowed.
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: high
Where a composite oral agreement is indivisible and includes an interest in land it will be unenforceable under the Law of Property (Miscellaneous Provisions) Act 1989 if not in writing, and that can prevent an oral contract being legally effective as to goodwill tied to the land; separately, a de facto transfer (the company stepping into the partnership’s business) can occur absent a legally enforceable contract and be recognised for tax purposes, with later formal documents (e.g. novation, TR1) simply formalising that earlier de facto transfer.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The Tribunal indicated that contemporaneous documentary evidence and subsequent conduct (accounting treatment, supplier/utility correspondence, staff notices) are particularly persuasive in assessing whether a de facto transfer has occurred, and that tribunals should be cautious about relying on distant oral recollections, preferring inferences from documents and probable facts.