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M Bruce-Mitford (TC4067)
The shares in the taxpayer’s company were acquired by VFB Group in a share-for-share exchange, and the taxpayer acquired 270,000 deferred shares in VFB Group, which later became ordinary shares.
He sold 310,000 ordinary shares in 2006/07 for £444,266.
He claimed that no income tax was due on the disposal, on the basis the deferred shares were not convertible securities at the time of their issue. The definition of “convertible securities” was replaced by the one in ITEPA 2003, s 436 from 1 September 2003.
HMRC held that a charge to income tax was triggered. The taxpayer appealed.
The First-tier Tribunal found the deferred shares were convertible securities within s 436, because the articles of the company made provision for their conversion into ordinary shares. It followed that an income charge applied.
The taxpayer’s appeal was dismissed.
