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HMRC internal manual

Business Income Manual

Specific receipts: exclusivity agreements: background

Exclusivity (or solus) agreements are a common feature of trading arrangements between petrol suppliers and garages, or between breweries and pubs. More recently, similar agreements have been made in other trades such as motor manufacturers or finance houses and car dealers; dairies and milk roundsmen; and building societies and their agency outlets.

Under these agreements, traders tie themselves for a period of years to one supplier of goods or services. In return, they receive a lump sum payment and/or periodic payments. Frequently such a sum is potentially repayable, but the agreement provides for the periodic waiver of the liability to repay a proportion of the sum provided the trader adheres to the terms of the exclusivity contract. If the agreement runs its full course, none of the amounts will be repayable (these are often referred to as ‘abatable’ loans).

Often the only pointer to the existence of an exclusivity tie will be a reference to a loan in the balance sheet. For details of the tax and accounting treatment, see BIM40305. If the expiry date of an agreement is known, it may be worth reviewing the case at that date to see whether the agreement has been replaced by a further agreement.

Information on the tax treatment of the payer can be found at BIM35550 - BIM35560.