Lapsed rights - cgt

The taxpayer exchanged shares in one company for loan notes by the acquiring company with option to redeem them in US or Canadian dollars or German Deutschmarks at a defined exchange rate. On the same day he gave notice to redeem the notes six months later and received £2.24 million. HMRC assessed the taxpayer to capital gains tax on the amount. The taxpayer appealed.

The Special Commissioner and the High Court dismissed the taxpayer's appeal so he proceeded to the Court of Appeal.

The taxpayer argued that the loan notes were qualifying corporate bonds within the meaning of TCGA 1992 s 117 at the time. He claimed that s 117(1)(b) looked to the time when the test was to be applied and therefore to rights that might be exercised at that time and in the future. If the right to convert had lapsed the loan note...