In this blog article, Beth Abbott from our Conveyancing team demystifies the term ‘Caveat Emptor’, the principles of which are key when buying or selling a new home. What does Caveat Emptor mean? Put simply, Caveat Emptor is a Latin term...
Client Connections 'Are Not Assets', Court of Appeal Rules
Client connections built up over a working life are certainly valuable, but the ability to take customers with you from one job to another is not in itself an ‘asset’, the Court of Appeal has ruled in a case of particular interest to the financial services industry.
The case concerned a team of experienced professionals who had moved from a bank to an investment management firm. They were remunerated at the full market rate and the firm agreed that, if they stayed in their jobs for two years, they would receive a portion of income generated from the clients they had brought with them.
HM Revenue and Customs argued that the latter payments were earnings from the team’s employment and were thus subject to Income Tax and National Insurance Contributions. The First-tier Tribunal subsequently upheld the firm’s challenge to that decision on the basis that the team’s personal client lists were assets that had been transferred to the firm in return for payments that were not employment-related. That decision was, however, subsequently reversed by the Upper Tribunal (UT).
In refusing to grant the firm permission to appeal, the Court of Appeal found that to describe the team’s client connections as assets was a misuse of legal language. There was no property in the team’s ability to persuade their loyal clients to follow them when they moved to the firm and the incentives paid to them arose from their employment. The firm’s appeal against the UT’s decision had no real prospect of success.