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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Goodwill: ownership of goodwill

Case Law provides authority for the proposition that goodwill is not capable of being separated from the business with which it is associated. For example, in IRC v Muller & Co Margarine Limited, (1901) AC 217, Lord Lindley said at page 235:

……goodwill is inseparable from the business to which it adds value and exists where the business is carried on.
The same proposition is stated clearly in Halsbury’s Laws of England, Volume 35 at paragraph 1208:

Goodwill is not a thing which can be separated and dealt with apart from the business out of which it arises……
A number of authorities are cited in Halsbury in support of this proposition including the Muller case. Of particular relevance are Wedderburn v Wedderburn (no 4) (1856) Beav. 84 where Romilly MR said at 104:

The goodwill of a trade, although inseparable from the business, is an appreciable part of the assets of a concern……
Also, Robertson v Quiddington (1860) 28 Beav.529 in which Romilly MR said at 535:

I fully concur in the observations on both sides, not only that the goodwill is a valuable and tangible thing in many cases, but it is never a tangible thing unless it is connected with the business itself, from which it cannot be separated.
And, Star Industrial Company Ltd v Yap Kwee Kor (1976) FSR 256 (P.C.) in which Lord Diplock said at 269:

Goodwill, as the subject of proprietary rights, is incapable of subsisting by itself. It has no independent existence apart from the business to which it is attached.
Furthermore, in Balloon Promotions Limited v Wilson, SpC 524, the Special Commissioner concluded at paragraph 165 of his decision that:

Goodwill cannot subsist by itself but must be attached to a business.
In the light of the above authorities HMRC considers that because goodwill is inseparable from the business in which it is generated and has its existence the disposal of a business as a going concern must involve the transfer of goodwill.