25 Mar 2018

McQuillan: entrepreneurs’ relief

08 November 2017

Much ado about nothing


  • Loan capital was converted into redeemable shares.
  • Were the shares ‘ordinary share capital’ within the definition of ITA 2007, s 989?
  • The shares did not have a right to a dividend.
  • Possible unfairness can be addressed only by parliament amending the legislation.

Zero crops up all over the place in tax legislation, as Andrew Hubbard explained in his article ‘Zilch, nada, zip’ (Taxation, 26 May 2016). That article was prompted by the First-tier Tribunal decision in McQuillan (TC5074) in which the key point was the nature of zero-dividend shares. This prompted me to review the case in ‘This means nothing to me’ (Taxation, 14 July 2016).

HMRC appealed and the Upper Tribunal has reversed the First-tier Tribunal’s decision. The case will, I suggest, decide once and for all whether shares that carry no right to a dividend are ordinary share capital for tax purposes within the definition in ITA 2007, s 989. Since this definition is widely adopted in the tax legislation, the decision and the reasoning behind it are important.



The case concerned Mr and Mrs McQuillan’s claim to entrepreneurs’ relief on the sale of shares in their company. It is not necessary to repeat all the facts since it was accepted by both sides that there was only one point at issue. The McQuillans met all the conditions to be entitled to the relief save, arguably, whether the company was their personal company. This test required each of ...

Only subscribers may read the full article

Printer-friendly version