Both third party payments necessary for transfer

The taxpayer claimed a tax loss of about £1.35m in connection with his participation in a gilt strips planning scheme (FA 1996 Sch 13 para 14A now ITTOIA 2005 s 427 to s 460).

This involved the taxpayer buying gilt strips at market value for about £1.5m using borrowed funds. An option was then granted to a trust to acquire the strips with an exercise price of £150 400. The trustees assigned the unexercised option to a bank for £1.35m. The bank then exercised the option and paid the taxpayer £150 400 to buy the strips. The taxpayer’s loss was the difference between the market value of the gilt strips and the exercise price.

The First-tier Tribunal dismissed the taxpayer’s appeal. He appealed to the Upper Tribunal.

The key issue for the Upper Tribunal was construction of the phrase ‘the amount payable on the transfer’. The First-tier Tribunal...