Jurisdiction(s):
United Kingdom

FTT: Merger termination fee not within TCGA 1992 s 22(1)(c) (no forfeiture, surrender or refraining); appeal allowed — Dialog Semiconductor Ltd v HMRC

Published on: 15 October 2025

Published by a LexisNexis Tax expert

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Dialog Semiconductor Ltd v HMRC [2025] UKFTT 1188 (TC)

The appellant sought to purchase Atmel, a US microchip manufacturer, and the parties signed a merger agreement. Under that deal, Atmel was barred from inviting competing bids; however, where an unsolicited superior proposal arose, it could terminate by paying a US$137m termination fee, subject to the appellant’s right to match. In due course, a better bid materialised and Atmel ended the agreement and paid the fee. Following an enquiry, HMRC issued a closure notice assessing the fee to corporation tax as a chargeable gain under section 22 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992), on the basis it was a capital sum derived from an asset. The notice was appealed. It was agreed in advance of the hearing that the FTT would address only whether the fee came within s 22(1)(c) as a capital sum ‘received in return for forfeiture or surrender of rights, or for refraining from exercising rights’. HMRC maintained that, if the FTT found...

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