Deeds of variation

Following a company reorganisation the taxpayer sold shares in Aarco for shares in two other companies Cleversort and Ever 119.

He then exchanged the shares in Ever 1199 for loan notes in O2 which comprised £265 950 par value of A loan notes and £62 900 par value of B loan notes and included a small amount of cash.

The loan notes were agreed to be non-qualifying corporate bonds for the purposes of TCGA 1992 s 117.

Five years later the taxpayer took part in a tax-planning scheme under which he entered into two deeds of covenant with O2 to redeem the loan notes in a foreign currency.

The move converted the notes into qualifying corporate bonds within s 117. The taxpayer redeemed the notes a month later for £328 860.

He claimed a loss of £26 379 in his 2003/04 tax return in respect...