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Nature of transaction

06 November 2017
Issue: 4623 / Categories: Tax cases

Clavis Liberty Fund 1 LP v CRC, Upper Tribunal (Tax and Chancery Chamber), 19 October 2017

Transactions in the course of a trade

The taxpayer was a partnership registered in Jersey. It bought the right to the bulk of dividends declared by a company for £59 958 000. The scheme was based on TA 1988 s 730 which provided that the dividends would be deemed to have remained the income of the seller and not of the partnership. The partnership would then bring in the cost of buying the dividend as an expense thus generating a loss. HMRC refused to allow the losses.

The First-tier Tribunal said the sale of the right to receive the dividends and the payment of those dividends were a ‘single composite transaction’ which could not be regarded as a trade.

The taxpayer appealed.

The main issue for the Upper Tribunal was whether the transaction was a trading one. Mr Justice Mann said the First-tier Tribunal had referred to FA...

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