Irrational outcome?

Gift of business asset to UK company by a transferor with non-UK resident relatives

The taxpayer a US citizen who was neither resident nor ordinarily resident in the UK transferred his interest in a business by way of a gift to WHR a new UK incorporated and resident company of which he was the sole shareholder and director. He claimed holdover relief but HMRC refused the claim on the basis that it was precluded by TCGA 1992  s 167 (gifts to foreign-controlled companies). Taking a literal interpretation of s 167 although the taxpayer controlled WHR TA 1988 s 416(6) attributed his control to his non-resident wife and children (as defined by s 417).

The taxpayer said this produced an ‘irrational arbitrary unjust and absurd result’ and a purposive interpretation should be adopted to allow the claim. Failing that a literal construction...