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The taxpayers, A and E, claimed in their self assessment tax returns for 2001-02 to have suffered a loss from the discount on a relevant discounted security for the purposes of FA 1996, Sch 13. The securities were received by the taxpayers as part of a tax avoidance scheme whose whole aim was an income tax loss.
HMRC refused the taxpayers' claims, as did the Special Commissioner on their appeal.
Mr Justice Peter Smith said that, looked at objectively, the Special Commissioner had found that there was never a possibility of the securities making a gain. There was no basis to allow the taxpayers to manufacture allowable losses where a theoretical possibility of a gain existed but where the parties intended that deep losses should be made. The Commissioner's conclusion was the only one possible.
Astall and another v CRC, Chancery Division, 27 June 2008
