Transfer of beneficial interest was a disposal

The taxpayer was an investor member in a company which gave a right to income and to capital along with general voting rights. He agreed to sell his distribution rights to a third party. Following completion he would hold the rights as nominee and trustee for the third party and would exercise the voting and other rights.

The taxpayer claimed entrepreneurs’ relief on the disposal of his distribution rights. HMRC refused the claim. The First-tier Tribunal dismissed the taxpayer’s appeal.

The taxpayer appealed to the Upper Tribunal claiming that the disposal did give not rise to a capital gain on the basis that the legal title to the distribution rights could not be transferred because there was no provision for this in the articles of association so there could be no disposal of the beneficial ownership.

The Upper Tribunal ruled that the relevant asset was the beneficial interest in...