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The taxpayer Michael Klincke sold his shares in his company and received shares in the acquiring company and also loan notes. The notes were considered to be non-qualifying corporate bonds for tax purposes.
The transactions constituted a reorganisation for the purposes of TCGA 1992 s 126 and therefore the gain on the taxpayer’s share disposal was rolled over into the new shares and loan notes.
The loan notes originally had an issuer option for redemption in US dollars. This was removed two years later pursuant to an extraordinary resolution of the noteholders and a deed of variation.
According to the taxpayer this made the notes qualifying corporate bonds (QCBs) and took them out of the scope of capital gains tax.
Mr Klincke then redeemed the notes and submitted his relevant tax return on the basis that the disposal of...
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