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Beneficial payment

11 September 2009
Issue: 4223 / Categories: Tax cases
John Patrick Smith (TC 163)

The appellant was employed by Sensormatic in 1998 and was later given options to purchase shares in the company.

It was agreed that if there were a change in control of the company the appellant would be allowed to sell any shares he held in Sensormatic at the price paid on the change in control.

In 2001 Tyco offered to buy Sensormatic via an exchange of shares. Just before the transaction took place the appellant exercised his options and so held shares in Sensormatic.

After Tyco had acquired the company he exchanged his Sensormatic shares for shares in Tyco which were valued at $47.245 each.

Then in 2002 when the shares were worth $17.269 he called on Tyco to buy back the shares at the price paid on the change in control. The appellant’s gain was in the region of £1.5 million.

HMRC said the...

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