Mr Boulting applied to HMRC for a statutory clearance on the sale of shares he owned back to the company as part of a ownership and management reorganisation.
In the application he advised that the sale proceeds of the shares were £600,000 each (£4.8m total). The clearance requested that the proceeds be subject to CGT and not IT. HMRC subsequently gave clearance.
An enquiry was opened up into Mr Boulting’s self-assessment which declared the capital gain. Eventually HMRC issued a closure notice that voided the clearance and treated the proceeds to income tax and NI, creating a c.£1m additional tax charge. This was on the basis that when Shares and Assets Valuation looked at the valuation, the shares were actually worth £66,900 and therefore the excess £533,100 was an extraction of value from the business and the transaction was not wholly to benefit the business.
The taxpayer argues that the clearance only asked for the sale price not the valuation and therefore he provided all that was required and should be able to rely on it.
His application for Judicial Review is refused as the issue is really around the value of the shares which will decide whether the main purpose was to benefit the trade or to extract value. That is the remit of the FTT.
The case can be viewed here.https://www.bailii.org/ew/cases/EWHC/Admin/2020/2207.html