Interesting TiS case

https://caselaw.nationalarchives.gov.uk/ukftt/tc/2024/378

Didn't find your answer?

Looks correct. Taxpayers paid the price for being frank (as to the CGT advantages of a share buy-back) in para 36. Perhaps if they'd have simply instead said that they needed the money for X good reason(s) (as in Allam) all would have been fine! (Maybe they were badly advised there.)

https://caselaw.nationalarchives.gov.uk/ukftt/tc/2024/378

Also, it looks like no-one knows if TMA 1970 is an Income Tax Act.

Replies (19)

Please login or register to join the discussion.

avatar
By rmillaree
15th May 2024 16:23

stupid is as stupid does - perhaps they are related to tim healy - what did he say again "yeah i hired a larger work related accomodation so i could entertain guests" - how to go from winning position to checkmate against in one sentence

Thanks (0)
avatar
By More unearned luck
15th May 2024 16:42

So it's bad advice to tell clients not to lie to HMRC and not to perjure themselves?

Thanks (0)
Replying to More unearned luck:
By Ruddles
15th May 2024 16:47

There is a difference between telling lies and keeping one's mouth shut.

It was drummed into me as a student that one should always tell the truth, nothing but the truth, but not necessarily the whole truth.

Thanks (1)
Replying to Ruddles:
avatar
By More unearned luck
15th May 2024 17:06

The appellants gave evidence. The oath they would have took isn't quite worded like that.

Thanks (0)
Replying to More unearned luck:
avatar
By rmillaree
15th May 2024 17:18

i think we all know that many people when they open the mouths may not know themselves what the truth is if they have a tricky must answer question !

Thanks (0)
Replying to More unearned luck:
By Ruddles
15th May 2024 18:24

I’m aware of that. My comment was somewhat tongue in cheek but I nevertheless consider it to be good advice which has served me well over the years.

Although I honestly don’t recall ever having to be sworn in as a witness at FTT.

Thanks (0)
Replying to Ruddles:
avatar
By More unearned luck
16th May 2024 18:50

Basic cases - informal usually no oaths
Standard and complex cases - formal usually oaths or confirmations required.

Thanks (0)
avatar
By kim.shaw-and-co.com
16th May 2024 01:20

A case of "asking for it", unfortunately for the appellants ! It's something of a bitter pill to have invested capital taxed as income on extraction, especially when you didn't need the cash. The TMA 1970 point was adeptly 'dodged' by the Tribunal !

I'm guessing (without trying to reconstruct the origin through original transactions) that the share premium extracted likely originated in uncrystallized distributions arising in a previous investment flowing into the company which effected the buy-back ?

Lost the thread on the numbers a bit half way through, but was the nominal share capital also re-designated as a distribution of profit so they effectively turned original capital invested out of taxed income (or crystallized exempted gains) back into income to be taxed under TiS [due to distributable reserves exceeding total consideration for shares at the time of the buy-back] ?

A valuable take-away is that TiS is again firmly being viewed as self-contained anti-avoidance such that if no counteraction notice and assessment in respect of a capital distribution is issued/made within 6 years a taxpayer is "in the clear" and TMA does not interfere with this to extend time limits. It's a long time to sweat, for sure, but at least there is a clear cut-off.

I'd be very interested to know how cases of deferred ascertainable consideration returned as disposal proceeds are handled in practice by the courts - in other words, say taxpayer sells for £100 of which £40 is up-front and £60 deferred for 3 years - all taxed on exchange of contracts as a capital disposal and returned at that time, ER claimed, enquired into and closure notice issued.

HMRC then thinks 6 years and a month after disposal (3 years and a month after deferred contingent consideration received) that the disposal is within TiS and they ought to have taxed it as income.

Could HMRC try to argue that a new 6-year time limit runs in relation to the deferred consideration received even if they are out of time in relation to the original proceeds ? I would hope not on the basis that the transaction in securities arose at the time of the original disposal but what one hopes and what emerges from the deliberations of the Courts are often divergent !

Thanks (0)
avatar
By taxdigital
16th May 2024 07:57

I find this a useful case particularly the part discussing the ‘the main’ or ‘one of the main purposes’. I remember a recent post on here where this was in point.

PS: I can see that the poster is missing in action: where is he gone?

Thanks (1)
Replying to taxdigital:
avatar
By Beancounting
16th May 2024 11:55

I'm waiting to find out who Frank is.

Thanks (0)
Replying to taxdigital:
avatar
By FactChecker
16th May 2024 17:11

I did wonder but got distracted and forgot to check.

The style is undoubtedly that of Justin Bryant (inimitable phraseology) ... and, lo, now that I check his Profile page it has been transformed into the dreaded 'Oops'!

Naughty step?

Thanks (2)
Replying to FactChecker:
avatar
By More unearned luck
16th May 2024 18:48

Indeed, Justin is the OP. I expect that he said something about someone in his typical frank manner, that was beyond the pale that the moderators live within.

Thanks (1)
Replying to More unearned luck:
avatar
By FactChecker
16th May 2024 19:49

Totally irrelevant to this thread, but your use of 'beyond the pale' reminded me of a conversation with a youngster (ok - in her 30s) a few days ago.
She'd never heard the phrase, so when I used it without thinking she immediately (at a speed that amazes me) had searched Google and proudly told me its etymology (latin palus for marking boundaries) and its 'modern' derivation (the area of Ireland under direct British control in the medieval ages).
Whilst I agreed the former, my memory told me she was wrong on the latter point ... so I started to explain all about the area in the old Russian Empire within which Jews were allowed permanent residency (if not much else).

Things might have got heated but, being a bright youngster, she then googled my 'version' ... and we found that we were both correct (although all the 'hits' listed by Google on a general search only have links to the Irish aspect).
Heaven helps us when newer generations rely on searches instead of memory - let alone when those search results become AI-derived.

Thanks (1)
Replying to FactChecker:
avatar
By More unearned luck
16th May 2024 20:07

My understanding of the etymology has always been that refers to a pale (ie a fence) around Dublin when that place was England's only toehold on Ireland.

A fairy in AMND says:

"Over hill, over dale,
Thorough bush, thorough brier,
Over park, over pale,
Thorough flood, thorough fire,
I do wander every where,
Swifter than the moon's sphere; "

Thanks (0)
Replying to More unearned luck:
avatar
By FactChecker
16th May 2024 20:30

Indeed (and thanks for not pointing out my egregious use of British when I meant and should have said English)!

It's a long time since I studied AMND - one of the texts used to speed-force me into being and thinking British as a pre-teen. It initially confused me due to things like 'thorough' vs 'through' (as did hymns referring to a 'green hill far away without a city wall') ... I love the English language now but it was a beast in those early days.

Anyway, sticking to my more usual pedanticism, pale derives from palus (latin for a stake, as used to create boundary markers and/or fencing) and so came to mean an enclosed area within a defined boundary - which of course applied both in Ireland and the old Russia.
My point, for what little it's worth, was that the one you are first taught becomes the 'true' version for you - and that of course will depend on the happenstance of where you are growing up as a young child. And this to me seems 'better' than the single homogenized version that Google will eventually feed to everyone.

EDIT: I see I spoke too soon (in my first sentence)!

Thanks (1)
Replying to FactChecker:
avatar
By More unearned luck
17th May 2024 15:41

Sorry, I keeping forgetting that no one likes a smart aleck.

Thanks (1)
Replying to More unearned luck:
avatar
By More unearned luck
17th May 2024 15:44

I too at school thought there was no city wall. It was much later that I realised that without was the opposite of within.

Thanks (0)
Replying to FactChecker:
avatar
By More unearned luck
16th May 2024 20:20

Was it 'Britain' in the middle ages? GB came into being in 1707. Too late to be medieval, surely.

Thanks (0)
avatar
By Justin Bryant
22nd May 2024 17:46

It's not much different to this analogous s423 IA 1986 purpose test in practice.
https://www.herbertsmithfreehills.com/notes/litigation/2018-08/court-of-...

If the taxpayer had simply given a good reason why they needed the money and that they would have done the share buy-back regardless (i.e. to get the cash for that other non-bad reason/purpose), all should have been fine potentially.

It's basically all about the difference between a purpose and a consequence (if merely a consequence of the taxpayer's share buy-back purpose (that was non CGT motivated) had been favorable CGT treatment then that's not enough to get HMRC home - as in Allam).

Thanks (0)