Adrian Kerrison and The Commissioners for HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Zacaroli,Judge Brannan |
| Neutral Citation | [2019] UKUT 0008 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Subject Matter | Tax,22 January 2019 |
| Date | 22 January 2019 |
| Published date | 22 January 2019 |
[2019] UKUT 0008 (TCC)
Appeal number:UT/2017/0101 and 0106
INCOME TAX AND CAPITAL GAINS TAX –scheme to generate capital loss
under s 106A TCGA – claim to income tax relief for the loss under s 574 ICTA
1988 – whether “value shifting” rules in s 30 TCGA applied to prevent a loss
arising – whether waiver of loan to appellant gave rise to a receipt subject to income
tax under s 687 ITTOIA 2005 (income not otherwise charged ).
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
ADRIAN KERRISON
Appellant
- and -
THE COMMISSIONERS FOR HER MAJESTY’S
Respondents
REVENUE & CUSTOMS
TRIBUNAL:
MR JUSTICE ZACAROLI
JUDGE GUY BRANNAN
Sitting in public at The Royal Courts of Justice, The Rolls Building, New Fetter
Lane, London on 11 and 12 December 2018
David Ewart QC and Edward Waldegrave, instructed by Reynolds Porter
Chamberlain LLP, for the Appellant
Julian Ghosh QC, Katherine Apps and Charles Bradley, instructed by the
General Counsel and Solicitor to HM Revenue and Customs, for the
Respondents
© CROWN COPYRIGHT 2019
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DECISION
Introduction
1. This appeal concerns the entitlement of the appellant to claim relief (in his tax
return for 2006-2007) from income tax in respect of £1,083,984 of a capital loss of
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£1,102,655 that he claims to have suffered as a result of a scheme entered into by him
in 2006
1
. Following an enquiry into the return, HMRC issued a closure notice on 10
August 2011 in which it concluded (1) that the claims should be denied and (2) that
one of the transactions, a loan waiver described more fully below, gave rise to a
charge to income tax on the amount waived.
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2. The appellant appealed that decision to the First-tier Tribunal (“FTT”). In a
decision dated 19 April 2017 (the “Decision”), Tribunal Judge Falk (as she then was)
dismissed the appellant’s appeal against the refusal of his claims to a capital loss and
to relief against income tax in respect of that loss, but allowed his appeal against
HMRC’s conclusion that the loan waiver was subject to income tax.
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3. Both the appellant and HMRC appeal to this tribunal, with the permission of the
FTT (as to part) and Judge Bishopp in the Upper Tribunal (as to the remainder).
The facts in outline
4. The scheme entered into by the appellant, known as the Excalibur scheme, was
designed and promoted by Premier Strategies Limited (“PSL”). The appellant was
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one of a number of participants. The Decision contains a detailed description of the
scheme. Its essential details, however, can be shortly stated. It involved the
following steps.
(1) A new company, Broadgate Trading Limited (“Broadgate”) was
incorporated in the Isle of Man on 28 April 2006. Its share capital was divided
25
into 10,003 A ordinary shares (issued to its two directors) and 10,002 B
Ordinary shares of £1. Broadgate acquired a small UK retail trade called the
Flower Emporium.
(2) The appellant subscribed for 20 B ordinary shares in Broadgate at their
par value (a total of £20) on 26 May 2006.
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(3) On 9 June 2006, the appellant entered into two agreements with an
unconnected company, Braye Finance Limited (“Braye”). Pursuant to the first
agreement, he sold his shares in Broadgate to Braye at a price of £1.22 per share
for a total consideration of £24.40. Pursuant to the second agreement, he
granted Braye a put option to sell the shares back to him within 30 days for their
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“fair value” plus 9.1%.
1
The claim for relief for income tax purposes in respect of a capital loss arose under s. 574
Income and Corporation Taxes Act 1988 where an individual ta xpayer has subscribed for shares in a
qualifying trading company.
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