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In 1994, the taxpayer, a property developer and entrepreneur, sold the entire shareholding in Castlegold Properties Ltd to Harlequin, a company controlled by his family via an offshore trust.
HMRC said the gain was not at arm’s length and TCGA 1992, s 17 came into play.
After reviewing the facts, the First-tier Tribunal decided that the price obtained for the shares, i.e. £20,000, was ‘no more than a token payment bearing no necessary relation to the underlying value of the asset sold’.
The sale was not therefore made at arm’s length and should be treated as having been made at market value.
The tax should be assessed on the market value of the holding which, in light of the evidence provided, the tribunal put at £2,129,526.
The taxpayer’s appeal was dismissed.
