CG12011 - Rights as assets: Kirby v Thorn

The difference between rights and freedoms was established in Kirby v Thorn EMI plc (60TC519) which CG68060 tells you about. The basic point in the case was whether a sum paid to Thorn for a covenant not to compete was chargeable as a Capital Gain. The Court considered it was. Part of it, at least, was a capital sum derived from the goodwill that Thorn owned in the trades of its subsidiaries.

The Court held that Thorn's liberty or freedom to trade was not an asset for Capital Gains Tax purposes, so was not the source of the payment. The point turned on what was meant by `property', TCGA92/S21 (1). In the context of Section 21(1), this word had to take its normal legal meaning, that of something which was capable of being owned. Someone's freedom to trade did not come within that normal meaning and the Court did not feel that the meaning could be extended to include such a freedom.

In Thorn, the company had entered into a restrictive covenant but the Court did not consider that the capital sum derived from that. CG68060 tells you how to deal with cases involving restrictive covenants and Capital Gains Tax.