CheckLists.Tax (beta)
G1: Disposal of shares
CAPITAL GAINS TAX
​
Residence
​
- Non-resident not generally liable to tax on gains on shares
​
- Non-resident is not chargeable on gains on shares accruing in a tax year unless (TCGA s.1A(3)):​
(1) the shares have a relevant connection to a UK branch or agency; or
(2) the shares derive at least 75% of their value from UK land and the person has a substantial indirect interest in the land.
​
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
​
​- Shares derive 75% of value from UK land: non-resident (including company) potentially taxable
General rule
- Liable if the shares derive at least 75% of their value from UK land and the vendor has a substantial indirect interest in that land.
- Shares may derive their value indirectly from land, e.g. through interests in other companies - see the rules in Sch 1A, para 3.
- Apply test at time of disposal (Sch 1A, para 3(1)(b)).
- Certain assets are disregarded in calculating the value of the company - Sch 1A, para 4.
- When a number of assets are disposed of together, the 75% test might be applied to the whole (Sch 1A, para 6).
- Targeted anti-avoidance rule (Sch 1A, para 11).
- Non-companies are liable to CGT (TCGA s.1A(3)(c))
- Companies are liable to corporation tax (TCGA s.2B(4)(b))
Substantial indirect interest: 25% investment in the last 2 years
- Insignificant periods of having a 25% investment can be disregarded (Sch 1A, para 8).
- HMRC say that a period of less than 10% is insignificant (CG73936)
- Aggregate the interests of connected persons (Sch 1A, para 10). Amended version of the s.286 definition of connected applies.
- Investment includes shares and non-commercial loans, but not restricted preference shares (Sch 1A, para 9(3)).
​
Rebasing to value as at 5 April 2019
- In calculating gain, assume that there was a disposal and reacquisition at market value on 5 April 2019 (TCGA Sch 4AA, para 3)
​​
Obligation to file tax return within 30 days and make payment on account
Subject to certain disposals being excluded (FA 2019, Sch 1)
​
Ordinary reliefs available
"Existing reliefs and exemptions will apply to non-residents as they do for residents. This will include, among the other exemptions and reliefs, the Annual Exempt Amount, the Substantial Shareholdings Exemption, and the no gain/no-loss intra-group transfer rules, which were specifically asked about in responses." (Consultation Response Document)
​
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:​
​
- Non-resident who may turn out to be temporarily non-resident (protective claims)
​​
- Consider making protective claims to relief.
- E.g. time limit for BADR claim is 12 months from filing date.
- Query when time limit begins running, given that gain treated as accruing in period of return.
- See P2. Temporary non-resident returns.
​
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
​
General
​
- Basis of charge
​
XX
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
​
- Timing of charge
​
XX
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
​
Consideration
​
- Disposal to connected person/not on arm's length terms: deemed market value consideration
​
XX
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
​
Allowable expenditure
​
Business asset disposal relief
​
- Conditions for relief
​
XX
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
​
- Substantial non-trading activities
- Substantial means of material or real importance in the context of the activities of the company as a whole (Allam, §90)
- Test is qualitative and quantitative (Allam, §90)
- Look at company activities as a whole (Allam, §90)
- What does it do in commercial terms? (Allam, §101)
- Not confined to physical human activity, includes holding investments such as property and collecting rent (Allam, §98).
- Take account of financial measures of activity (Allam, §102)
- Whether asset is income producing is only one factor (Allam, §103)
- Not appropriate to apply a numerical threshold, as suggested by HMRC's guidance (Allam, §90).
- Query whether the Potter decision that tying reserves up in 6-year investment following financial crash not an activity (Allam, §113).
Legislation: TCGA s.169SA, Schedule 7ZA, s.165A(3);
Cases: Allam v. HMRC [2021] UKUT 291 (TCC); Potter v. HMRC [2019] UKFTT 554;
HMRC manuals:
Commentary:
See also:
​​​
- Uncertain deferred consideration may fall outside of relief
​
- If a sale is made for uncertain, deferred consideration, the right to the consideration is valued at the point of disposal and that value can qualify for relief, but the later disposal of the right to consideration is not a qualifying disposal.
- Accordingly, if the ultimate proceeds are higher than the value of the right to the unascertained consideration, there will be a gain that does not qualify for relief.
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
​
Remittance basis
​
- Remittance basis applied to sale of shares in non-UK property-rich company
​
- A non-resident selling shares in a company deriving its value from UK land will be liable to UK tax, but a UK resident remittance basis taxpayer could apply the remittance basis to the sale of shares in a non-UK company and, thereby, defer or avoid the charge to UK tax.
Legislation:
Cases:
HMRC manuals:
Commentary: Clark's Offshore, §32.9;
See also:
​
CORPORATION TAX ON CHARGEABLE GAINS
​
Substantial shareholding exemption
​
De-grouping charges
​
EMPLOYMENT INCOME TAX
​
- Disposal for consideration of restricted securities a chargeable event
​
- Disposal of restricted securities for consideration by an associated person otherwise than to another associated person is a chargeable event (ITEPA 2003, s.427).
Legislation: ITEPA 2003, s.427;
Cases:
HMRC manuals:
Commentary:
See also:
​
Employment-related securities
​
- Disposal treated as discharge of notional loan under Chapter 3C leading to employment income
​
- Disposal of the employment-related securities that were acquired for less than market value is treated as discharging the notional loan under Chapter 3C (s.446U(1)).
- The amount of the notional loan outstanding prior to disposal counts as employment income (s.446U(2)).
- Loan not treated as discharged if, at the time of acquisition, there was an actual or contingent liability to make further payments equal to the amount initially outstanding amount for the shares (s.446U(1A)).
- > In that case, discharge is primarily tied to the release or repayment of that liability, or transfer of the shares for consideration reflecting the liability (see s.446U(1)(b), (4)).
- No charge under Chapter 3C if the share are transferred along with a liability to make payments equal to the notional loan and the consideration reflects that liability (s.446U(4); example at ERSM70120).
- Note that payment does not appear to include transfer of an asset in satisfaction of a liability (s.421(2)).
Legislation: ITEPA 2003, s.446U;
Cases:
HMRC manuals: ERSM70120;
Commentary:
See also:
​
INCOME TAX
​
Residence
​
- Land owning companies
​
- Non-resident vendor potentially liable to income tax/corporation tax - see below, Transactions in land.
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
​
Transactions in land
​
- Profit on shares treated as UK trading profit if there was an arrangement to develop the land and realise a profit
- Shares must derive 50% of value from UK land at time of sale
- Obtaining planning permission is not development (BIM60806)​
- Same rule applies to losses (CTA 2010 s.356OF; ITA 2007 517F)
- Targeted anti-avoidance rule (CTA 2010 s.356OK; ITA 2007 517K)
- Apportionment if part of profit fairly attributable to period before arrangement to develop (s.356OL(4))
Legislation: CTA 2010, s.356OD, s.356OE; ITA 2007, s.517D, s.517E
Cases:
HMRC manuals:
Commentary:
See also:
​
Small shareholder
"Where there is a small shareholder who has no or little input into the company which is developing the land, it is unlikely they will be concerned in an arrangement. There is a large spectrum of situations and the specific circumstances will determine whether an individual or company is concerned in an arrangement." (BIM60845)
​
Non-resident vendor liable to UK income tax/corporation tax
- The profit is treated as a profit of a trading of dealing in or developing UK land (ITA 2007 s.517E(2); CTA 2010, s.356OE(2)).
- Such trades are liable to UK tax (ITTOIA s.6(1A); CTA 2009, s.5(2A))
​​
Transfer of assets abroad
​
- Transferor has power to enjoy income
​
Interaction with TiS.
​
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
​
Settlements legislation
​
- Transfer of shares at undervalue v. future expectations is settlement
​
- "[79] It seems to me clear that, when considering whether there was an "arrangement" within the meaning of the sections, i.e. an arrangement which involved an element of bounty, one should assess the position at the time that the alleged arrangement was made, but, in carrying out that exercise, one should not disregard what happened thereafter. In particular, if the parties intended an element of bounty to accrue, and that element of bounty does indeed eventuate, then, absent any other good reason to the contrary, there is indeed an "arrangement"..." (Garnett).
Legislation
Cases: Garnett v. Jones [2007] UKHL 35;
HMRC manuals:
Commentary:
See also:
​
- Gift of non-voting preference shares to spouse is a settlement
​
- In order to be protected as an outright gift under ITTOIA s.626 the gifted property not substantially a right to income
- Gift of non-voting preference shares would be substantially a gift of income and thus not protected.
- See C2. Gift by an individual.
​
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
​
INCOME TAX: TRANSACTIONS IN SECURITIES (taxing capital receipts as income)
​
Conditions: general
​
- Disposal of shares is a transaction in securities.
- Must relate to a close company (see conditions A and B), but close company includes a company that would be close if UK resident (s.713(1); CTM36820).
- If the transactions have a main purpose of obtaining an income tax advantage and an income tax advantage is obtained for any person in consequence of the transaction(s), the transaction in securities rules may apply.
- The income tax advantage need not be in consequence only of the transactions in securities (Grogan, §117).
- Condition A or B must be satisfied (see below).
- Income tax advantage
- Essentially, would more income tax have been payable if the relevant consideration constituted a distribution than was payable by way of capital gains tax (s.687(1)).
- Capped by reference to the maximum amount that could be distributed (s.687(2)).
- Include distributable reserves of subsidiaries (CTM36815).
- Persons not liable to income tax on distributions do not obtain an income tax advantage by receiving relevant consideration, e.g. companies.
- No need for the relevant consideration to represent a gain.
- Main purpose:
- Main purpose must be the income tax advantage in s.687, not just any income tax advantage (Osmond, §55).
- From 2016/17 legislation is concerned with the purposes of the transaction whereas previously it was the purpose of a person being party to the transaction.
- HMRC say the new test is broader and includes "the consequences that may be expected to result from those transactions" (CTM36806).
- Osmond UT - main purpose of obtaining a CGT relief (which necessarily required CGT to apply rather than income tax) was not a main purpose of obtaining an income tax advantage.
- Previous test concerned with taxpayer's subjective purpose (Allam, §148)
- Only conscious motives, but inferences may be drawn from the facts (Allam, §170)
- There will always be an alternative transactions which will involve an income tax charge, that does not show main purpose of avoiding tax (Allam, §168)
- Straightforward sale to connected company is simpler transaction than share for share exchange (Allam §169)
- No main purpose where alternative transaction not considered and good commercial reasons for share sale to connected company (Allam §§163 and 169)
- Clearance procedure available (s.701; CTM36841).
Legislation:
Cases:
Allam v. HMRC [2021] UKUT 291 (TCC);
Grogan v. HMRC [2010] UKUT 416 (TCC), Warren J;
Osmond v. HMRC [2025] UKUT 183 (TCC), Meade J and Judge Brannan;
HMRC manuals: CTM36806; CTM36815; CTM36820;
Commentary:
See also:
​
A1: consideration representing the value of assets available for distribution or in respect of future receipts/trading stock
​
The condition
(1) As a result of the transaction(s) in securities;
(2) A relevant person receives relevant consideration;
(3) The relevant consideration is received in connection with the distribution, transfer, realisation or application of assets of a close company;
(4) The relevant person does not pay or bear income tax on the consideration.
​
Close company
- Includes a company that would be close if UK resident (s.713).
Relevant person
- The party to the transaction in securities or any other person who obtains an income tax advantage in consequence of the transaction (s.685(3A); CTM36820).
- This means the code can apply where, for example, non-resident trustees are party to a TiS, but the income advantage is obtained by a UK resident beneficiary. The counteraction would have to be against the trustees.
As a result of
- Same phrase as used in s.686 for the fundamental change of ownership requirement (which must be as a result of the TiS).
​
Relevant consideration
- Consideration in any form (including money or money's worth - s.685(8)) which​:
(a) is or represents the value of assets available for distribution by way of dividend by the company (i.e. the company whose assets have been distributed, transferred, realised or applied) or any company it controls (s.685(7B)), or would have been so available apart from anything done;
- Dividend includes distributions and interest (s.713(1)).
(b) is received in respect of future receipts of the company; or
(c) is or represents the value of trading stock of the company.
- Assets not available for distribution where negative distributable reserves in Bamberg (§20).
- Reference to assets available for distribution "apart from anything done" would include capitalising the profits (Hague) but does not include profits arising to another company following transfer of a trade (Bamberg, §21).
- Receipt of a loan was consideration in Williams (at 543).
- Meaning of money's worth - usually things that are capable of being converted into money (EIM00540).
Return of share capital
- HMRC say that if the company has sufficient distributable reserves, the exclusion in s.685(7A) is "unlikely to apply" although "sometimes it might be demonstrated that such a return represents subscribed capital only" (CTM36822).
- However, see TCCR W6.3.14 for a different view.
Represents the value
- Cleary - rejected the need for any appropriation of the distributable assets for the purpose of providing the relevant consideration (two taxpayers each owned half of two companies. Each taxpayer sold their shares in company 1 to company 2 for market value which was paid out of accumulated profits).
- In Hunt, a sum paid by way of a reduction in capital (share premium created upon purchase of subsidiary by way of share for share exchange), was held to represent the value of assets available for distribution simply because the company had sufficient distributable reserves to have distributed that sum (§40).
- Note that this can lead to a form of double taxation as the distributable reserves will still be there and taxed as income if distributed (but see Hunt, §66).
- In cases of share purchase, the purchase price may include consideration representing the value of the distributable reserves of the purchased company (see examples below).
In connection with:
- "'One of the very generally accepted meanings of “connexion” is “relation between things one of which is bound up with or involved in another”; or again, “having to do with”. The words include matters occurring prior to as well as subsequent to or consequent upon so long as they are related to the principal thing. The phrase “having to do with” perhaps gives as good a suggestion of the meaning as could be had." (see Emery at 171).
- In Emery, purchase price effectively funded by dividends after the sale. Assumed vendor did not know about this. Nevertheless, the purchase price was received in connection with the later distributions.
- In Wiggins receipt of the purchase price for a company was in connection with the earlier transfer out of the business of that company (to facilitate the sale of an asset that remained in the company).
Future receipts
- Covers forward dividend stripping of future profits, but query what the distributable reserves would be in such a case.
​
Legislation: ITA 2007, s.685;
Cases:
Cleary v. IRC 44 TC 399
Hague v. CIR 44 TC 619;
IRC v. Wiggins [1979] 1 WLR 325;
Williams v. IRC [1980] STC 535;
Bamberg v. HMRC [2010] UKFTT 333 (TC);
Hunt v. HMRC [2025] UKFTT 538 (TC);
HMRC manuals: CTM36820; CTM36822;
Commentary: TCCR, W6.3.6;
See also:
​
B: consideration is shares/securities representing the value of assets that were or would have been available for distribution or trading stock
​
The condition
(1) A relevant person receives relevant consideration;
(2) The relevant consideration is received in connection with the transaction(s) in securities.
(3) Two or more close companies are concerned in the transactions in securities.
(4) The relevant person does not pay or bear income tax on the consideration.
​
Close company
- Includes a company that would be close if UK resident (s.713).
Relevant person
- The party to the transaction in securities or any other person who obtains an income tax advantage in consequence of the transaction (s.685(3A); CTM36820).
Relevant consideration
- Consideration consisting of shares or securities issued by a close company and which is or represents the value of assets which:
(a) are available for distribution by way of dividend by the company (presumably the company issuing the shares/securities) or any company it controls (s.685(7B));
- Dividend includes distributions and interest (s.713(1)).
(b) would have been so available apart from anything done by the company; or
(c) are trading stock of the company.
- Non-redeemable shares - Where the relevant consideration is share capital that is not redeemable, it is only relevant consideration so far as the share capital is repaid (including during a winding up) (s.685(7); CTM36823).​
- See further, above, Condition A1.
​​
Legislation:
Cases:
HMRC manuals: CTM36823;
Commentary:
See also:
​
A2: consideration is shares/securities representing the value of assets that were or would have been available for distribution or trading stock
​
The condition
(1) As a result of the transaction(s) in securities;
(2) A relevant person receives relevant consideration;
(3) The relevant consideration is received in connection with the direct or indirect transfer of assets of one close company to another close company.
(4) The relevant person does not pay or bear income tax on the consideration.
​​
Close company
- Includes a company that would be close if UK resident (s.713).
​
Relevant person
- The party to the transaction in securities or any other person who obtains an income tax advantage in consequence of the transaction (s.685(3A); CTM36820).
​
Relevant consideration
- Consideration consisting of shares or securities issued by a close company and which is or represents the value of assets which:
(a) are available for distribution by way of dividend by the company (presumably the company issuing the shares/securities) or any company it controls (s.685(7B));
- Dividend includes distributions and interest (s.713(1)).
(b) would have been so available apart from anything done by the company; or
(c) are trading stock of the company.
- Non-redeemable shares - Where the relevant consideration is share capital that is not redeemable, it is only relevant consideration so far as the share capital is repaid (including during a winding up) (s.685(7); CTM36823).​
- See further above - Condition A1.
​​
Legislation:
Cases:
HMRC manuals: CTM36823;
Commentary:
See also:
​
Exception: fundamental change of ownership
​
General rule
- Transaction in securities not caught where the original shareholders do not, as a result of the transactions, directly or indirectly hold more than 25% of the ordinary share capital, distribution rights and voting rights (s.686).
- Original shareholder means a person who held any ordinary shares before the transaction.
- Also consider associates (CTM36830).
- Shares held by persons controlled by an original shareholder, or two or more original shareholders, are attributed to the original shareholders (s.686(5)).
​
As a result of the transaction
- Condition must be met "as a result of the transaction" in securities.
- Cannot already be the case.
​
​Legislation: ITA 2007, s.686;
Cases:
HMRC manuals: CTM36830;
Commentary:
See also:
​
Counteraction
​
- Counteraction applies against the party to the TiS, who may not be the same person who obtains the income tax advantage (s.684 and 698).
- Amount that can be counteracted is limited to the amount that could "in any circumstances" have been paid to the person or an associate of the person, by way of distribution in any circumstances at the relevant time (ITA 2007, s.687(2)).
- Include the distributable reserves of any subsidiaries.
- Query whether to include sums that could be distributed if capital was reduced.
- Query what the position is where the money was contributed to an employee benefit trust (to fund the purchase of the shares), thereby reducing the distributable reserves (see Grogan)?
- Any CGT paid reduces the amount of the income tax advantage.
- Counteraction not necessarily limited to the amount of any gain on the sale of shares.
Legislation: ITA 2007, s.687; s.698;
Cases:
HMRC manuals: CTM36815;
Commentary: TCCR W6.2.5;
See also:
​
Examples
- Share for share exchange
​
- If T sells his/her shares in one company in return for ordinary shares in another company (NewCo):
- Condition A is not met because there is no transfer etc. of assets by a close company.
- Query whether the transfer of shares in one close company to another is an indirect transfer of the assets of the former to the latter (Kessler says it is, but arguably 'indirect' covers cases of actual transfer through a number of steps rather than an end result similar to (but not the same as) transfer).
- Condition B is not met as long as the shares received are not redeemable and the share capital is not repaid.
- Unlikely there is an income tax advantage purpose.
- But if T intends to reduce the share capital in NewCo and receive a payment, that will satisfy Condition B (CTM36851; Consultation Document 2015 §3.12).
- In Wroe, the taxpayers inserted a new HoldCo by share for share exchange receiving 25% ordinary shares plus preference shares. The preference shares were repurchased over the next 3 years. By the FTT hearing, the only issue was re tax advantage purpose (§110).
- Williams v. IRC - share exchange followed by Newco purchase of a company that had made loans to the shareholders equal to distributable profits.
- Hunt - share for share exchange to acquire subsidiaries followed by reduction in share capital 13 years later caught.
Legislation: ITA 2007, s.685(7);
Cases:
Wroe v. HMRC [2022] UKFTT 143 (TC);
Williams v. IRC [1980] STC 535;
Hunt v. HMRC [2025] UKFTT 538 (TC);
HMRC manuals: CTM36850; CTM36851;
Commentary: Kessler, Ch 55;
See also: Consultation Document 2015;
​
- Sale of shares to unconnected company for ordinary shares + cash
​
- If T sells his/her shares in one company in return for cash + ordinary shares in another company:
- Condition A:
- There is a transfer of assets by the purchaser company (the cash paid to T).
- Query whether the cash represents the value of assets available for distribution by purchaser company, it may if there are distributable reserves in the purchaser company.
- Even if it does, query how much could have been distributed to T in any circumstances (s.687(2)).
- There is no transfer of assets by the company sold by T (query whether it is a 'realisation' of the assets of that company).
- Query whether it is permissible to look at the distributable reserves of the company sold by T which comes to control as a result of the transaction in securities (s.685(7)).
- Condition B is not met as long as the shares received are not redeemable and share capital is not repaid.
- Unlikely there is a main income tax advantage purpose if the shareholding in the purchaser is low (e.g. 5%).
Legislation:
Cases:
HMRC manuals: CTM36850.
Commentary:
See also:
​
- Sale of shares to connected company for cash
​
- If T sells his/her shares in one company in return for cash from a company owned by a connected person (e.g. T's spouse)
- Condition A:
- There is a transfer of assets by the purchaser company (the cash paid to T).
- Query whether the cash represents the value of assets available for distribution by purchaser company, it may if there are distributable reserves in the purchaser company.
- Even if it does, query how much could have been distributed to T in any circumstances (s.687(2)).
- Might be received in respect of future receipts of purchaser co if purchase price intended to be funded by distributions from T's company.
- There is no transfer of assets by the company sold by T.
- Query whether it is permissible to look at the distributable reserves of the company sold by T which comes to control as a result of the transaction in securities (s.685(7)). In Cleary, Brown and Allam, the distributable reserves were in the purchasing company.
- Condition B is not met as the consideration is not shares or securities.
- Query whether there is a main income tax advantage purpose if T is actually exiting the business.
- HMRC say clearance unlikely to be given (CTM36851). Presumably HMRC believe it is permissible to look at the distributable reserves of the company sold by T (in their example, the purchaser is a newco with no distributable reserves).
- Note the potential for double taxation, as the distributable reserves will still exist.
- Cleary - two taxpayers each owned half of two companies. Each taxpayer sold their shares in company 1 to company 2 for market value which was paid out of accumulated profits. TiS applied.
- Brown - T and his wife sold their shares in one company to 5 other companies which they also controlled. TiS applied.
- Clark - T, a farmer, sold his interest in one company to another company in which he held shares in order to raise funds to purchase an adjoining farm. Held: commercial transaction with no object of obtaining a tax advantage.
- Lloyd - T sold his shares in P to P Holdings for cash funded by a dividend by P to P Holdings. Argument of commercial objective of equalising holdings with new directors rejected as unnecessary for that purpose and could have been achieved by share for share exchange.
Legislation:
Cases:
Cleary v. IRC 44 TC 399;
Brown v. IRC 47 TC 217;
Lloyd v. HMRC [2008] STC (SCD) 681;
Allam v. HMRC [2021] UKUT 291 (TCC)
HMRC manuals: CTM36851;
Commentary: Kessler, Ch 55;
See also:
​
- Sale of shares to person who extracts assets from the company in connection with funding purchase price (e.g. management buyout)
​
- If T sells his/her shares to a person who subsequently extracts assets (e.g. cash) from the company (e.g. liquidation) and that cash is used directly or indirectly to fund the purchase consideration
- Condition A:
- There is a transfer of assets by the company sold (the cash paid to the purchaser).
- T receives consideration which represents the value of any assets available for distribution by the company T has sold (the purchase price).
- May also be in respect of future receipts of payment of the purchase price is linked to future distribution of profits by the company (Greenberg).
- Depending on the facts, the purchase consideration received by T may be received "in connection with" the transfer/distribution of assets to the purchaser.
- Condition B is not met as the consideration is not shares or securities (unless, perhaps, purchaser is a company and purchase price is left outstanding).
- Query whether the main purpose of obtaining an income tax advantage test is met.​
- Greenberg v. IRC: company issued fully paid up preference shares to its shareholders who sold them to a third party. Purchase price for shares was paid in instalments as and when dividends were paid by the company to the purchaser. Both the sale contract and the payment of instalments were transactions in securities.
- IRC v. Brebner - a group of shareholders borrowed money to purchase the remainder of the shares in the company to prevent it being taken over by another company. The target company subsequently increased its capital by capitalising reserves and then reduced its capital and made payments to the purchasers which were used, in part, to pay off the debt. Held that obtaining a tax advantage was not a main purpose.
- IRC v. Emery - purchase price effectively funded by dividends after the sale. Assumed that T did not know there would be dividends, but it was all a tax avoidance scheme.
Legislation:
Cases:
Grogan v. HMRC [2010] UKUT 416 (TCC), Warren J;
Greenberg v. IRC [1972] AC 109;
HMRC manuals:
Commentary:
See also:
​
- Sale of shares to person who has received assets from the company in connection with funding purchase price (e.g. purchase by employee benefit trust)
​
- If T sells his/her shares to a person who has previously received assets (e.g. cash) from the company (e.g. contribution to employee benefit trust) and that cash is used directly or indirectly to fund the purchase consideration
- Condition A:
- There is a transfer of assets by the company sold (the cash paid to the purchaser).
- T receives consideration (the purchase price) which represents the value of assets that were or would have been available for distribution by the company T has sold but for the earlier payment.
- Depending on the facts, the purchase consideration received by T may be received "in connection with" the transfer/distribution of assets to the purchaser ("no doubt" about this in Grogan - §96).
- Condition B is not met as the consideration is not shares or securities.
- Query whether the main purpose of obtaining an income tax advantage test is met.
- In Grogan, the purchasing employee share ownership trust was set up solely to facilitate avoidance of tax by the vendor and had no commercial purpose (§67).
Legislation:
Cases:
HMRC manuals: Grogan v. HMRC [2010] UKUT 416 (TCC), Warren J;
Commentary:
See also:
​
- Sale of shares following transfer of business out of company
​
- IRC v. Wiggins - Shareholders wanted to realise value of a valuable piece of trading stock whilst retaining company business, so the company transferred the business to Newco and Oldco was sold. Held: the sale price reflected the value of the trading stock and the receipt of consideration (share purchase price) was in connection with the transfer of the business.
Legislation:
Cases: IRC v. Wiggins [1979] 1 WLR 325;
HMRC manuals:
Commentary:
See also:
​
CORPORATION TAX ON INCOME
​
Controlled foreign companies
​
- Transfer of shares to UK resident company: apportionment of certain profits of company transferred​
XX
Legislation: CTA 2010, s.731;
Cases:
HMRC manuals:
Commentary:
See also:
​
Transactions in securities
​
- Corporation tax advantage obtained by transaction in securities
​​
XX
Legislation: CTA 2010, s.731;
Cases:
HMRC manuals:
Commentary:
See also:
​
XX Deduction of expenses incurred in respect of sale of shares
​
Expenses incurred in deciding whether to sell or acquire asset are expenses of managing of an investment business
- applies to holding companies and intermediate holding companies (s.1218(1))
- no deduction for expenses of a capital nature (s.1219(3)).
Centrica UKSC
Legislation: CTA 2009, s.1219;
Cases: Centrica Overseas Holdings Ltd v. HMRC [2021] UKUT 200 (TCC);
HMRC manuals:
Commentary:
See also:
​
​
STAMP DUTY
​
- Scope/application to foreign shares
​
- Applies to instruments conveying shares where either the instrument is executed in the UK or it relates to any property situated in the UK or to any matter or thing done or to be done in the UK.
- Foreign shares are not exempt, but it is normally the case that they are transferred by an instrument outside the UK and have no other relevant nexus to the UK.
- If foreign shares are transferred in exchange for an issue of UK shares, UK stamp duty on foreign shares unless documents executed abroad and kept abroad.
- Consequence of failing to get a document stamped is that it cannot be relied upon before a UK court.
Legislation: Stamp duty Act 1891, s.14(4));
Cases:
HMRC manuals:
Commentary:
See also:
​
STAMP DUTY RESERVE TAX
​
- Scope/application to foreign shares
​
- Applies to chargeable securities (FA 1986, s.87).
- Chargeable securities does not include securities issued by a non-UK incorporated body unless (s.99(4)):
- Registered in a register in the UK;
- Paired with shares issued by a body corporate incorporated in the UK; or
- Are interests or rights in such shares.
- issued by a UK Societas.
​
Legislation: FA 1986, s.87; s.99;
Cases:
HMRC manuals:
Commentary:
See also:
​
SDLT
​
Land transactions in connection with sale of company
​
- Distribution of land to company followed by sale of that company (s.75A)
​
- HMRC's view (SDLTM09430) is that s.75A will apply where, as part of an arrangement:
(1) an intermediate holding company (NewCo) is inserted between a holding company (HoldCo) and its subsidiary (SubCo);
(2) SubCo distributes properties to NewCo (exempt from SDLT);
(3) NewCo distributes the original subsidiary back to the holding company;
(4) HoldCo sells NewCo.
​​
Legislation:
Cases:
HMRC manuals:
Commentary: SDLTM09430;
See also:
​
VAT
​
REPORTING
​
- Transfer of shares or debentures in foreign subsidiary valued at over £100m
​
FA 2009, Sch 17
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
​