Is a professional cricket ground a business? Or is it merely land with income streams attached? The First-tier Tribunal’s (FTT’s) answer to those questions in a guideline case relieved the former owner of one such facility from a crushing Capital Gains Tax (CGT) bill.
The ground, which hosted test matches and other major cricketing events, featured a substantial stadium and its freehold owner generated profits through advertising and hospitality and catering services. The freehold was ultimately sold to the county cricket club to which it had hitherto been leased.
HM Revenue and Customs (HMRC) argued that the sale involved the disposal of land, with attached income streams, thus giving rise to a substantial CGT liability. The former owner, however, contended that, together with the property, it had sold a business, with attached goodwill, and that the disposal of those commercial assets gave rise to no chargeable gain.
Ruling in the former owner’s favour on that issue, the FTT found that it had engaged in a serious business undertaking, in earnest pursuit of profit and in accordance with ordinary business principles. HMRC’s plea that the income streams were ancillary to the land, and not capable of existence without it, were devoid of merit.
The former owner’s business had an established client base and its reputation and goodwill had been generated by much hard work and professional marketing and sales operations. The value of that goodwill was not subsumed in the value of the property in that the business could have been sold separately, even to a competitor of the club, or run from a different location.
In ruling that the former owner had, separately from the property, disposed of its business and attached goodwill, the FTT found that the success of its commercial ventures was connected not with the land as such, but with the staging of major cricketing spectacles.
