Man Awarded Costs Against Brother in Will Dispute Case
A man who successfully challenged his mother’s final will is likely to recover the lion’s share of his legal costs after the High Court ruled that his brother, who attempted...
Continue readingThere are often very specific rules that must be complied with in order to claim tax reliefs, but if a small mistake arises, the courts may be able to provide assistance. In a recent case, the First-tier Tribunal (FTT) found that an investor was entitled to Entrepreneurs’ Relief on the disposal of his shares in a company, despite owning one share fewer than he needed to qualify for it.
The investor had agreed to purchase 5 per cent of the shares in the company for £500,000. He wished to own at least 5 per cent of it in order to qualify for Entrepreneurs’ Relief (now known as Business Asset Disposal Relief), so that a reduced rate of Capital Gains Tax would apply to any gains. At his request, an anti-dilution clause was included in the shareholders’ agreement to prevent his shareholding falling below 5 per cent. When the company was later sold, he realised a capital gain of about £600,000. He only discovered when HM Revenue and Customs (HMRC) enquired into his claim for Entrepreneurs’ Relief that his holding was one share short of 5 per cent. This was because the number of shares allocated to him had been calculated using a spreadsheet which had rounded the percentages to two decimal places.
The investor appealed to the FTT on the grounds that, if appropriate proceedings were brought, the High Court would order rectification of certain documents so that he would have owned at least 5 per cent of the company in the year before it was sold, and that the FTT should proceed as if rectification had been granted.
The FTT heard evidence from the company’s founders and its Finance Director, who all stated that the agreement had been that the investor would purchase no less than 5 per cent of the company. In view of this and the existence of the anti-dilution clause, the FTT rejected HMRC’s contention that it had only been intended that he would receive ‘about’ 5 per cent of the shares. The relevant documents clearly did not reflect what had been agreed. Upholding his appeal, the FTT concluded that the High Court would have granted rectification of the documents, enabling him to claim Entrepreneur’s Relief.