Land Securities: Capital Loss Scheme

The First-tier Tribunal has dismissed the taxpayer's appeal against HMRC's decision to disallow a £200m capital loss created by a tax avoidance scheme which relied on the share matching rules in section 106 TCGA 1992. In doing so, the Tribunal felt unable to ignore certain of the scheme steps on Ramsay principles but nonetheless determined that the scheme failed through the application of the value shifting rules, as modified by the deeming provisions of section 106.

Scheme relied on reacquisition of shares being matched with earlier disposal

The taxpayer was short of funds following a large repayment of capital and therefore approached several banks in order to raise additional capital to fund some planned property acquisitions and to protect its credit rating. Morgan Stanley proposed the scheme in question which was intended to provide the taxpayer with short-term finance but also to create a large capital loss.