TIMOTHY WATTS v Revenue & Customs (TAX AVOIDANCE - INCOME TAX - loss determination on disposal of gilt strips) [2022] UKFTT 408 (TC) (07 November 2022)

TIMOTHY WATTS v Revenue & Customs (TAX AVOIDANCE - INCOME TAX - loss determination on disposal of gilt strips) [2022] UKFTT 408 (TC) (07 November 2022)

The Tribunal found that the arrangements were not a sham and the individual deeds and agreements had legal effect. However, the calculation of loss under para 14A Schedule 13 FA 1996 must be interpreted in light of the statutory purpose and context. The amount paid by the third-party purchaser to the trustee is not an 'amount payable on the transfer' for the purposes of para 14A(3)(b). The appellant is entitled to some loss relief, but the quantum of the allowable loss is reduced from the amount claimed.

Citation
[2022] UKFTT 408 (TC)
Parties
Appellant: Timothy Watts; Respondents: The Commissioners for His Majesty’s Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
07 November 2022
Procedural Posture
Tax Appeal / First Tier Tribunal (tax Chamber) Decision After Remote Video Hearing
Outcome
Appeal allowed in part
Legal Topics
Income Tax, Tax Avoidance, Loss Relief, Gilt Strips, Statutory Construction
Tax Law Income Tax Tax Avoidance Loss Relief Gilt Strips Statutory Construction

Case Brief

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Parties

Timothy Watts

Appellant

The Commissioners for His Majesty’s Revenue and Customs

Respondents

Procedural Posture

Tax Appeal / First Tier Tribunal (tax Chamber) Decision After Remote Video Hearing

Legal Issues

  1. 1 Whether the appellant is entitled to loss relief under paragraph 14A Schedule 13 Finance Act 1996 for losses claimed on disposal of gilt strips
  2. 2 Whether the arrangements constituted a sham
  3. 3 Whether the loss under para 14A is a commercial or legal concept

Ratio Decidendi

The Tribunal found that the arrangements were not a sham and the individual deeds and agreements had legal effect. However, the calculation of loss under para 14A Schedule 13 FA 1996 must be interpreted in light of the statutory purpose and context. The amount paid by the third-party purchaser to the trustee is not an 'amount payable on the transfer' for the purposes of para 14A(3)(b). The appellant is entitled to some loss relief, but the quantum of the allowable loss is reduced from the amount claimed.

Court Disposition

Appeal allowed in part

Orders

  • The appellant's claim for loss relief under para 14A Schedule 13 FA 1996 is allowed in a reduced quantum; the closure notice is to be amended accordingly; the additional tax assessment is to be recalculated based on the reduced allowable loss.