Upper Tribunal decides tax and trusts appeal in respect of gilt strips

Watts v Commissioners for HM Revenue and Customs [2024] UKUT 00168 (TCC)

Jonathan Davey KC has received judgment from the Upper Tribunal in an appeal concerning a claim for tax relief on losses said to arise on the sale of gilt strips.

In circumstances where the taxpayer had acquired the gilt strips, granted an option over the strips to a trust of which he was life tenant, and then sold the strips to an investment bank which had acquired the benefit of the option from the trustees, the Upper Tribunal held that the taxpayer had not sustained a loss on the transfer (other than a loss of less than 1% of the amount claimed) for the purposes of the phrase “the amount payable on the transfer” (paragraph 14A(3) of Schedule 13 to the Finance Act 1996).

Accordingly, the Upper Tribunal upheld the First-tier Tribunal’s finding that on a purposive construction of the relevant legislation, the statutory language was to be interpreted more broadly than the Appellant contended for, and, therefore, on the facts of the case, the “transfer” in question comprised the aggregate of two amounts including, significantly, a payment made for the assignment of the option (as contended for by the Respondents) rather than just one amount (as contended for by the Appellant).

The Upper Tribunal therefore determined the appeal in the Respondents’ favour.

Jonathan Davey KC acts for the Respondents with Joshua Carey (Devereux Chambers); Aparna Nathan KC and Colm Kelly (Devereux Chambers) act for the Appellant.

Read the full judgment here