Linked transactions

The taxpayer sold his shares in PL Schofield Ltd for £11.84 million in the form of bank guaranteed loan notes. He redeemed the loan notes realising a chargeable gain of £10.726 million.

He reported a loss of more than £11 million in his 2002/03 tax return to offset the chargeable gain arising on the redemption of the loan notes. This loss had arisen as a result of his purchase of a put option in February 2003 which he disposed of on 4 April 2003.

The option arrangements were part of a purchased tax scheme designed to shelter the gains which the taxpayer had made on the loan notes.

The issue before the First-tier Tribunal was whether the surrender of the option on 4 April created an allowable loss.

The tribunal found from the evidence that the sole purpose of the...