Main purpose of share exchange was not to avoid tax

Mr and Mrs Wilkinson owned about 58% of the ordinary shares in P Ltd. In July 2016 they gave each of their three daughters 6 951 shares in the company. A couple of days later the entire shareholding of P Ltd was sold to TF1 Ltd for a consideration of £130m paid as cash and loan notes. The daughters received a different class of loan notes from the other directors and B ordinary shares in TF1 Ltd but no cash consideration. They were also appointed as non-executive and non-paid directors of a company that was a 100% subsidiary of P Ltd. These arrangements would enable the daughters to claim entrepreneurs’ relief when they sold their loan notes and shares a year later – which they did. However the taxpayers said the main aim of the transactions was to realise the value of P Ltd.

HMRC considered...