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Loan note mayhem

24 March 2008
Issue: 4151 / Categories: Tax cases
Harding v CRC, Chancery Division, 30 January 2008

The taxpayer was issued in January 1995 with loan notes by one company in exchange for shares he had held in another company.

The loan notes had a currency conversion option exercisable within a certain time limit.

On the same day he gave notice to redeem the notes in July. He did not exercise the currency conversion option which expired.

HMRC assessed the taxpayer to capital gains tax on the redemption of the loan notes.

The taxpayer appealed. The issue was whether the loan notes were qualifying corporate bonds under TCGA 1992 s 117 and whether they had fallen foul of s 117(1)(b) because he had not exercised the currency conversion option.

The Special Commissioner dismissed the taxpayer's appeal so he appealed again.

The High Court held that the loan notes were not securities 'in respect of which no provision is made for conversion into...

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