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Vocalspruce Ltd v CRC, Upper Tribunal (Tax and Chancery Chamber)
The taxpayer was a subsidiary of Brixton plc which in December 2003 subscribed for zero coupon loan notes in various companies in its group.
The loan notes were transferred to the taxpayer in exchange for shares with a nominal value and also at a premium. It was agreed that the premium would be paid by capitalising profits arising on the loan notes and paying the sums into the taxpayer’s share premium account.
The taxpayer claimed that the payments transferred into its share premium account did not have to be brought into account when calculating taxable profits because they fell within FA 1996 s 84(2)(a). HMRC disagreed.
The taxpayer’s appeal to the First-tier Tribunal was unsuccessful. The matter continued to the Upper Tribunal which said the profit on the loan notes upon realisation was credited to a profit and loss account meaning it was...
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