News - tax case 13 Oct

Tapered relief

In May 1999, the taxpayer sold her single share in a close company which she had bought for £1 in April 1989. The net proceeds were £1,229,790; after indexation this was reduced to £1,229,788.58. In her 1999-2000 tax return, the taxpayer calculated taper relief at 15%, giving a final gain of £1,045,320.29. She later amended this, saying that by virtue of the words 'had been held' in TCGA 1992, s 2A(8), she had held the share for a qualifying period of ten years and, therefore, under s 2A(5) she was entitled to taper relief at 75%.
HMRC enquired into the amendment and further amended it. On appeal to the Special Commissioner, it was held that s 2A(8)(b) applied and a year was to be added to the relevant period. Under s 2A(8)(b), the holding period was the period after 5 April 1998 for which the asset was held, plus one year, and there was no basis for applying the period of ten years or more in the table in s 2A(5). HMRC's amendment was confirmed. The taxpayer appealed to the High Court.
Mr Justice Lawrence Collins said that there was no basis for the taxpayer's argument that the ordinary meaning of the words 'had been held' was apt to include the whole of the period from acquisition in 1989. The plain meaning was that the qualifying period was that after 5 April 1998 for which the asset had been held at the time of its disposal, i.e. just over a year. The Special Commissioner was correct to decide that taper relief was due on the basis of one qualifying year plus one year.
The taxpayer's appeal was dismissed.
O'Sullivan v HMRC, Chancery Division, 6 October 2006

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