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Vocalspruce Ltd v CRC, Court of Appeal
The taxpayer company was a subsidiary of Brixton plc which subscribed in December 2003 for zero coupon loan notes in several companies in its group.
The loan notes were assigned to the taxpayer in exchange for shares with a nominal value equal to the value of the loan notes and at a premium which would be paid by capitalising profits arising on the loan notes. The sums would then be paid into the taxpayer’s share premium account.
The company claimed the transactions fell within FA 1996 s 84(2)(a) meaning the credit that would otherwise have been taxable the loan relationships rules had not been brought into account. The profits on the loan notes were required to be transferred to the share premium account and as such the effect of s 84(2)(a) was to remove such amounts from the scope of tax.
HMRC disagreed and...
