Insufficient evidence

Business asset taper relief

The taxpayer who was director and shareholder of S sold most of his shares to R a US company He received shares in R in exchange. He sold some of the R shares in 2002-03 and the balance in 2003-04.

The issue concerned whether the taper relief rules (TCGA 1992 Sch A1) applied. If the R shares were business assets the gain would be reduced by 75% after two years’ ownership so that capital gains tax at 10% was due. This depended on whether R was a qualifying company and that in turn depended on whether the taxpayer was an employee of the company. HMRC said he was not. The taxpayer appealed saying R had employed him.

The First-tier Tribunal said under the share purchase agreement the payments by R to the taxpayer were...