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Agreement did not constitute grant of an option

09 May 2024
Issue: 4936 / Categories: Tax cases
M Krishnamohan and another (TC9146)

The taxpayers were a married couple. They were establishing a property portfolio and also ran a newsagents and general convenience store.

In 2013 they found a large expensive property they wished to acquire. Their usual high street bankers chose not to provide loans because of the agricultural covenants in place on the property. So they entered into an option agreement with a British Virgin Islands registered company that provided short-term loans. In essence this provided that if the loan and interest were not repaid within a particular timeframe the lender would have the right to buy specified properties on the schedule.

All the loans and associated interest were repaid as agreed.

HMRC said the transactions entered into by the taxpayers were the grant of an option chargeable to capital gains tax under TCGA 1992 s 144. The taxpayers said the transactions were loan agreements and...

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