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UK resident company P was the beneficial owner of four million shares in W. As part of a tax avoidance scheme P decided to sell half the shares to wholly owned subsidiary E for a consideration that was left unpaid.
E then sold the shares to buyers in the open market. In the same period the business acquired a long derivative contract and sold a short derivative contact.
E established three subsidiaries PA QU and Q each of which entered into other derivative transactions resulting in substantial net capital losses which were claimed. E also sold its shares in QU to an unconnected third party realising a loss on the disposal which the business claimed.
HMRC said E’s gain on the disposal of its shares in W was chargeable to corporation tax...
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