20 April 2022

Wroe, Rimmer & Timms v HMRC; (FTT)

The First-tier Tribunal has released its decision in Wroe, Rimmer & Timms v HM Revenue and Customs.

The three Appellants were the directors and majority shareholders in a company. Following a share-for-share exchange, they were issued ordinary shares and preference shares in a new holding company. The Appellants redeemed their preference shares in return for total consideration of £1.8 million. HMRC issued counteraction notices and assessments under the Transactions in Securities Regime (in Chapter 1 Part 13 ITA 2007) which were challenged by the Appellants, and the main issue before the Tribunal was whether one of the main purposes of each of the Appellants being a party to the transactions in securities was to obtain an income tax advantage (within the meaning of section 684(1)(c)). The Tribunal accepted HMRC’s arguments that, although there were a number of non-tax reasons which were associated with the transactions, one of the main purposes for the issue of preference shares to the Appellants was to enable them to receive cash representing the historic value of the business in the form of capital, rather than in the form of income (which would have been subject to income tax).

Ben Elliott, instructed by HMRC, for the Respondents.

To view the decision, click here.