In March 2000 the taxpayer bought an off-the-shelf company which created loan stock that was allotted to the taxpayer for £6 million.
In 13 years’ time he would be due to be paid £11 780 974 representing the £6 million plus 7.25% of £6 million a year for the 13 years outstanding.
The taxpayer then formed a family trust into which he transferred the loan stock which at the time had an open market value of £2 536 437.
In his 1999/2000 tax return he claimed loss relief of £3 463 563 on the basis that the loan stock was a relevant discounted security and that FA 1996 Sch 13 para 8 deemed a transfer between connected persons to be at open market value.
HMRC refused...
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