Share price

Insufficiency of funds to pay capital gains tax

The taxpayer had sold his company to a public company M and received shares as consideration. Under the sale agreement he was required to maintain an escrow account to provide security to M for contingent liabilities. This account was to be funded by the sale of shares. The taxpayer sold half of these and placed the proceeds into the account. Soon after completion the share price started to fall. The taxpayer therefore decided to defer further disposals in the hope that it would recover. He said another reason that he did not dispose of any more shares was that he was working for M so a sale may have been considered as insider dealing.

The taxpayer was liable to capital gains tax of £2m on the sale of his company. He paid this six months late ...