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Herefordshire Property Company Ltd (TC4286)
The controlling director of the taxpayer company wanted to sell an investment property. He sought advice on how to mitigate charges after learning that 68% of the gain would be lost taxes.
His tax adviser suggested a capital redemption policy scheme that would create an allowable capital loss which the company could realise and offset against the gain on the property. A similar scheme was marketed by KPMG and Grant Thornton.
The taxpayer went ahead with the scheme and then completed its tax return showing the gain against which the loss was to be offset.
The scheme was later found by the Special Commissioners the High Court and the Court of Appeal to fail. The taxpayer accepted the result withdrew the loss and paid the tax on the gain.
HMRC told the controlling director that he and the other participants in the scheme were to be...
