Reason of employment

GR was a director of a UK company until February 2003 when he resigned. He was unpaid and had no contract of employment.

A management buyout of the business took place and GR was granted share options in the acquiring concern. He surrendered the options for new ones in 2004.

The acquiring firm was sold in July 2007 to the taxpayer company to which GR sold his the options. He was not subject to UK tax on the gains because he was not resident in the UK.

The taxpayer firm applied to HMRC in November 2008 for non-statutory clearance that the option gains qualified for relief under FA 2003 sch 23.

The taxman refused the claim. The shares must have been granted to GR by reason of employment for sch 23 relief to have applied.

The First-tier Tribunal said sch 23 “should be read in its...