Jurisdiction(s):
United Kingdom

FTT (Tax): penalties for careless BADR claims after gifts reduced holdings below 5%; refusal to suspend under HMRC’s SMART criteria upheld—Cox and another v HMRC

Published on: 25 June 2024

Published by a LexisNexis Tax expert

Legal News

Article summary

Cox and another v HMRC [2024] UKFTT 510 (TC)

A married couple, the taxpayers served as directors and minority shareholders in a company that operated as financial advisers. Each owned roughly 6% of the share capital. In 2018, several shareholders, including the couple, chose to sell their shares to other continuing shareholders. During a meeting between the directors and a representative of the solicitors dealing with the sale, EWM, the representative went round the table to confirm that every director and their spouses would be entitled to entrepreneurs’ relief on the disposal. Afterwards, the directors determined that the sale consideration should be divided so as to better reflect each person’s contribution to the business. Consequently, the taxpayers each gifted part of their shareholding to other shareholders. Those gifts qualified for holdover relief but left each taxpayer with a 4% stake in the company. They did not obtain independent financial advice on the tax impact of the gifts for entrepreneurs’ relief, relying on...

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