Life policy losses

The taxpayer claimed a loss of £1.96 million on second-hand life assurance policies. The disposal of the policies also gave rise to a chargeable event gain of £1 351. This amount was not deducted from the proceeds; instead the taxpayer deducted the entire surrender value to reduce the proceeds to nil.

The issues were whether the surrender proceeds were excluded for capital gains tax purposes by TCGA 1992 s 37 and if not whether the consideration paid for the policies by the taxpayer should be deducted from the surrender proceeds under s 38.

The taxpayer appealed first to the Special Commissioner who found for HMRC so he appealed again.

In the High Court the judge held that the surrender proceeds were not excluded but that the surrender value could be deducted from the consideration received by the taxpayer.

The taxpayer's appeal was allowed in...