True price of shares

The taxpayers took part in an avoidance scheme which involved the acquisition of options to acquire shares the exercise of the options and payment and the sale of the shares.

Participants paid large sums into a discretionary trust to acquire the assets. The shares were sold for very small amounts generating large losses.

HMRC disallowed the taxpayers’ claim for losses.

The First-tier Tribunal (FTT) dismissed taxpayers’ appeal saying the real acquisition cost was the redemption value not the one claimed.

The taxpayers appealed again.

The Upper Tribunal said the FTT had correctly asked the question about whether the amount paid by the participants was “wholly and exclusively” for the shares.

It was clear the participants knew “perfectly well” that the shares were not worth anywhere near the amount they paid for so there must have been another benefit. In this instance it...