Intelligent guesswork

Valuation of shares for the purpose of a gift to charity

The shares in FTG were admitted to the alternative investment market (AIM) on 28 July 2004. The taxpayer had bought shares in FTG in June 2004. He gifted them to a charity on 28 July 2004 and claimed tax relief under ITA 2007 s 431. He said the shares were valued at 48p each the price they were being traded on AIM. The relief claimed (£15 866) was more than the £10 000 he had paid to subscribe for the shares.

HMRC said the share price should be 8p. It asserted the arrangements surrounding the admission of the shares to AIM were intended to allow subscribers to claim income tax relief greater than their cash investment.

The taxpayer appealed (this was a lead case).

The First-tier Tribunal said the question centred on what the hypothetical prudent purchaser...