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R Baker (TC2790)
The taxpayer’s company agreed in January 2006 that he would receive a payment of £120 000 in a purchase by the business of its own shares.
The taxpayer resigned as director following the completed deal and ceased employment with the firm.
HMRC assessed the payment to capital gains tax on the basis it was a distribution from the company. The taxpayer appealed saying the sum was a capital distribution that qualified for business asset taper relief – a contention the Revenue rejected.
The department said the taxpayer had not held the shares for the requisite five-year qualifying period (CTA 2010 s 1035) because the business had been incorporated in 2002.
It was subsequently found that the settlement agreement was void for a number of reasons including that the firm had insufficient distributable reserves and parts of the Companies Act 1985 had been breached.
HMRC...
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