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In 1999, S Ltd purchased the shares in another company, G Ltd, for £3.5 million. The appellant, in order to assuage concerns that the company was overvalued, had reduced the price of G Ltd to £3.7 million.
Shortly after the sale, the owner of S Ltd, C Ltd made an anonymous donation of £200,000 to a Christian charity favoured by the appellant.
HMRC claimed that the £200,000 was part of the consideration and assessed it to capital gains tax.
After a detailed examination of the facts, the Special Commissioner said that the £200,000 donation was not just a coincidence, and that at some stage, C Ltd and the appellant agreed on the donation to confirm the sale of the company.
The commercial reality was that the company was sold for £3.7 million, but that part of the purchase price was diverted to the charity.
The taxpayer's appeal was dismissed.
Crusader (SpC 640)
