Upper Tribunal decision in M Group: Not what we hoped for

The background to this case is described in more detail in my article ‘Substantial disappointment’ about the First-tier Tribunal (FTT) decision in M Group Holdings Ltd (TC8054) (Taxation 10 June 2021). Much to my chagrin the Upper Tribunal has confirmed that decision.

Background

In brief to facilitate the sale of the trade of M Group Ltd (MGL) a new subsidiary Medinet Clinical Services Ltd (MCS) was incorporated and the trade and assets of MGL’s business were hived down. MCS was sold 11 months later for just under £55m. The intention was that there would be no corporation tax on the chargeable gain due to the substantial shareholding exemption (SSE). HMRC disagreed and charged MGL around £10.6m in corporation tax.

Substantial shareholding exemption

The company relied on TCGA 1992 Sch 7AC para 15A which exempts gains in these...