William Reeves v Revenue & Customs Commissioners: Holdover Relief – Definition of “Control”

March 1, 2017


A non-UK resident taxpayer was unsuccessful in appealing against HMRC’s disallowance of his claim for holdover relief from capital gains tax under the Taxation of Chargeable Gains Act 1992.

The taxpayer had disposed of his interest in a UK-based business by transferring it by way of gift to a newly formed UK company of which he was the sole shareholder and director. HMRC disallowed the claim for holdover relief on the basis of s167 of the 1992 Act because the taxpayer’s wife was not UK-resident and, as an ‘associate’ of his, could be deemed to control the company. The parties agreed that on a literal interpretation, ‘control’ included both ‘real’ and ‘fictional’ control and that the Act therefore attributed control of the company to his non-resident wife. The issue was whether a purposive interpretation should be adopted so as to allow a claim for holdover relief.

The First-tier tribunal held that it was not possible to interpret “control” purposively so as to refer only to ‘real’ control and excluding ‘fictional’ control. Nor was it possible to be abundantly sure that there had been a statutory drafting error so as to enable the Tribunal to correct the literal meaning of the legislation. The taxpayer had also not suffered any difference in treatment and had been taxed in exactly the same way as a UK resident with a non-resident wife.

This article appears in the JHA March 2017 Tax Newsletter, which also features:

  1. 2017 Spring Budget: EU Rights and Claims by Steve Bousher
  2. Prudential Assurance Company Ltd v HMRC: Supreme Court grants HMRC permission to appeal by Peter Stewart

You can download the complete newsletter as a PDF: March 2017 – Tax Newsletter.