O'Brien v Benson's Hosiery (Holdings) Ltd [1981] 53 TC 241

• All legal rights that can be turned to account by the extraction of a capital sum are ‘assets’.

• The test is whether such rights can be converted into money or money’s worth and the mere act that rights are non-assignable does not matter so long as consideration can be obtained in some other way (for instance, by surrendering the right).

• X was sales director of the taxpayer co under a seven-year service contract.

  • The company released him from his service contract in consideration of £50,000.

  • The Crown relied on what is now s 21(1) and s 22(1)(c).

• Revenue argued that rights under service contract were assets.

• Taxpayer argued that since rights are incapable of being assigned so incapable of being an asset. 

Lord Russell

• If, as here, the employer is able to exact from the employee a substantial sum as a term of releasing him from his obligations to serve, the rights of the employer appear to me to bear quite sufficiently the mark of an asset of the employer, something which he can turn to account, notwithstanding that his ability to turn it to account is by a type of disposal limited by the nature of the asset.

• It is erroneous to deduce from s 22(4) a principle of general application for the purposes of capital gains tax that an asset must have a market value.