Sales of occupation income avoidance rules apply

In 2001 the taxpayer began acting in the Harry Potter films. Ten years later Clay 10 Ltd was incorporated – for the provision of the actor’s services – with the taxpayer as sole shareholder and his father as sole director. Various rights together with business information and goodwill attaching to his name were transferred to the company for consideration of £8.5m.

The debt was left outstanding as a shareholder loan account with £4.5m treated as consideration for rights records and goodwill. In his 2011-12 tax return the taxpayer included £4m as income and the £4.5m as a capital gain on which he claimed entrepreneurs’ relief.

After an enquiry HMRC decided the sale of occupation income provisions applied and issued a closure notice charging the £4.5m to income tax. The notice said HMRC was treating the capital amount the taxpayer received on the...