The taxpayer was a participant in a tax avoidance scheme involving the sale and repurchase of shares which was intended to create a capital loss. The revenue refused the taxpayer’s claim to tax relief in respect of the capital loss he said he had suffered as a result of the scheme. The First-tier Tribunal dismissed the taxpayer’s appeal from that decision, holding that the capital loss was reduced to nil under the value shifting provisions in section 30(5) of the Taxation and Chargeable Gains Act 1992, which, by subsection (1), applied where the disposal of an asset was part of a scheme under which (a) the “value” of the asset had been materially increased or reduced, and (b) a tax-free benefit had been conferred on the person making the disposal.
On the taxpayer’s further appeal and the question whether “value” for the purposes of section 30(1)(a) meant market value or the value contemplated by the parties—
Held, appeal dismissed. The meaning of “value” in section 30 of the Taxation of Chargeable Gains Act 1992 was dictated by the terms and aim of the scheme. If the change in value which the scheme was designed to achieve was one which was pre-determined by the parties, then it meant such pre-determined amount. But if the change in value which the scheme was designed to achieve was that which was the consequence of some other act, then the value was to be assessed objectively. In the instant case, “value” meant the value contemplated by the parties, the aim of the scheme having been to effect a change in the value of the shares by a pre-determined amount. Since the shares had been disposed of for £24·40 and reacquired for approximately £1·1m, they had materially increased in value, accordingly the condition in section 30(1)(a) had been satisfied (paras 28, 29, 32, 37, 77).
David Ewart QC and Edward Waldegrave (instructed by Reynolds Porter Chamberlain llp) for the taxpayer.
Julian Ghosh QC, Katherine Apps and Charles Bradley (instructed by General Counsel and Solicitor to HM Revenue and Customs) for the revenue.