A flawed decision?

SHINEBOND LIMITED ACQUIRED Chas Polsky Estates Limited ('the company') in November 1981 for £152 634 and sold the company in December 1988 for £397 365. The company's principal asset was property in London and for the purposes of computing the corporation tax on the gain on the disposal the value of the company at 31 March 1982 had to be determined.

The Special Commissioner ([2006] STC (SCD) 147) found for HMRC's approach to the valuation based on the total net assets of the company at 31March 1982 (£200 257). This included the value of its property at that date which had been determined by the Lands Tribunal at £168 000. He decided against Shinebond's contention that the company's value should be arrived at by capitalising its net rental income and dividends paid. However a subsidiary question was whether the valuation should be adjusted to take account of the...