Rescission of the transaction was not an option

In November 2016 the taxpayer transferred ten properties to a company wholly owned by his wife. There was no written agreement between him and the company before the transfer but it was understood they would be transferred for £300 000 which would be left outstanding as a debt due from the company to the taxpayer.

The taxpayer did not include the disposal on his tax return because he believed that no capital gains tax was payable. This was because he thought no capital gain arose because the properties were transferred at cost and also because the spouse exemption (TCGA 1992 s 58) applied.

HMRC disagreed and raised an assessment. Meanwhile because of their incorrect understanding of the capital gains position the taxpayer and the company agreed that the transfer of the properties should be rescinded by transferring them back to the taxpayer.

The taxpayer appealed. He...