Jonathan Cooke v The Commissioners for HMRC
[2024] UKFTT 272 (TC)
Trustees of the Peter Buckley Settlement v The Commissioners for HMRC
4 January 2024
[2024] UKFTT 29 (TC)
First-tier Tribunal
A trust sold a company share and tried to claim a tax break (Entrepreneur's Relief). Even though the person running the company and benefiting from the trust owned the share through the trust, the tax rules said he had to own it directly. The court decided the rules are clear – the tax break couldn't be claimed, and extra tax is owed.
Key Facts
- •The Peter Buckley Settlement claimed Entrepreneur's Relief (ER) on the sale of a single share in Peter Buckley Clitheroe Ltd (PBCL).
- •Peter Buckley, the life tenant and a trustee of the Settlement, was also a director of PBCL.
- •The share was held by the Settlement, not by Mr. Buckley personally.
- •HMRC disallowed the ER claim because Mr. Buckley did not personally hold at least 5% of the ordinary share capital as required by s169S(3)(a) CGTA 1992.
- •The appeal concerned whether Mr. Buckley's indirect control through the trust satisfied the 5% shareholding requirement.
Legal Principles
Entrepreneur's Relief (now Business Asset Disposal Relief) requires the individual to hold at least 5% of the ordinary share capital of the company.
TCGA 1992, s169S(3)(a)
Trustees of settlements can claim ER for disposals of trust property, but the qualifying beneficiary must meet specific conditions, including holding at least 5% of the share capital.
TCGA 1992, s169J
Statutory interpretation should consider the context, scheme, and purpose of the Act. Literal interpretations should not lead to unjustified outcomes.
WT Ramsay Ltd v Inland Revenue Commissioners [1982] A.C. 300; IRC v Duke of Westminster [1936] AC
In a trust, the legal ownership (trustee) and beneficial ownership are separate. The trustee does not own the asset personally.
Trust Law principles discussed in the judgement
Outcomes
The appeal was dismissed.
Mr. Buckley did not hold the share in his personal capacity; he held it as a trustee. The court found that the clear intention of Parliament was that Mr. Buckley must own at least 5% of the shares in his personal capacity to qualify for ER.