Graham Chisnall & Ors v The Commissioners for HMRC
[2023] UKFTT 857 (TC)
Nicholas Bell & Ors v The Commissioners for HMRC
20 November 2023
[2023] UKFTT 989 (TC)
First-tier Tribunal
Three people gave shares to charity and claimed tax relief. The tax office took a long time to check, and the people argued this was unfair. The judge said it wasn't unfair and decided how much the shares were worth. For one company, the value was the same as the tax office said, but for another, it was lower, so those people owe more tax.
Key Facts
- •Three appellants claimed income tax relief on gifts of shares to charity in 2003.
- •Shares were in Cityblock Plc and Strategic Retail Plc, admitted to AIM.
- •Appellants valued shares at 51.25p and 93.875p respectively; HMRC at 12p and 26.68p.
- •HMRC's enquiries took 12-13 years.
- •Appellants applied to debar HMRC due to abuse of process; application refused.
- •The main issue was the market value of the shares at the date of gifting.
Legal Principles
Income tax relief on gifts of shares to charity is determined by the market value of the shares under section 587B ICTA 1988.
Income and Corporation Taxes Act 1988 (ICTA)
Market value is the price reasonably expected on the open market; no reduction for simultaneous sale; for shares not on the Stock Exchange Daily Official List, all information a prudent purchaser would require is assumed available (TCGA 1992).
Taxation of Chargeable Gains Act 1992 (TCGA 1992)
Valuation principles include a hypothetical sale, willing vendor, reasonable marketing, equal opportunity for buyers, reasonably prudent and informed purchaser, and identifying the highest price a prudent purchaser would pay.
Close, Nuttall and Chisnall v HM Revenue & Customs [2022] UKFTT 193 (TC)
A prudent purchaser would demand all reasonably required information, including unpublished and confidential information, as a condition of buying.
Caton’s Administrators v Couch [1995] STC (SCD) 34, summarised in Netley v HM Revenue & Customs [2017] UKFTT 442 (TC)
The Tribunal can increase tax charged if an appellant is undercharged (TMA 1970).
Taxes Management Act 1970 (TMA)
Outcomes
Appeals concerning Cityblock shares dismissed.
Market value of Cityblock shares was found to be 12p per share, aligning with the closure notices. The Tribunal accepted Strickland's evidence, giving weight to the consideration and Wacks Caller share valuations.
Appeals concerning Strategic Retail shares dismissed.
Market value of Strategic Retail shares was 14.25p per share (lower than closure notices). The Tribunal accepted Strickland's cost approach; inability to quantify value added by initial subscribers prevented a higher valuation. Assessments increased under section 50(7) TMA 1970.
Abuse of process application dismissed.
While HMRC's delay was inordinate and inexcusable, the appellants failed to demonstrate that this resulted in the loss of material evidence that would have been available to a prudent purchaser. Publicly available information (in offer documents and prospectuses) was deemed sufficient for valuation.