In Ivan Wroe & Ors v HMRC [2022] TC08474, the First Tier Tribunal (FTT) found that the Transactions in Securities (TiS) legislation applied to the redemption of preference shares issued on a reorganisation. Obtaining an Income Tax advantage was a main purpose of the reorganisation and repurchase. 

The TiS rules give HMRC the power to counteract an Income Tax advantage resulting from transactions between Close companies and their owners where the main or one of the main purposes for undertaking the transaction is that of obtaining an Income Tax advantage.

Following a Statutory review, which upheld HMRC's counteraction notices, the taxpayers Appealed to the First Tier Tribunal (FTT).

The FTT dismissed the taxpayers’ appeals, finding that a main purpose of each of the appellants in being a party to the reorganisation and the repurchase of the preference shares was to obtain an Income Tax advantage.

Useful guides on this topic

Transactions in Securities
This note examines the rules for an Income Tax advantage from the perspective of shareholders.

Transactions in Securities: Case studies
This guide contains potential case studies for the Transactions in Securities (TiS) rules. 

An Index to Reorganisations, Demergers & Share transactions
What is a company reorganisation or reconstruction? What tax reliefs apply to a company reorganisation, a share for share exchange, reconstruction or other transaction involving shares?

Case Study 7: Creating a group by share for share exchange
What are the steps for creating a group by way of a share for share exchange? 

Share capital: What's an ordinary share?
What is an ordinary share? Why is it important?

Business Asset Disposal Relief (Entrepreneurs' Relief): Disposal of shares or securities in a company
When can you claim Business Asset Disposal Relief (BADR) on a share sale? What is the rate of Business Asset Disposal Relief (Entrepreneurs' Relief)? How do you claim BADR? What case law is there on BADR?

External link

Ivan Wroe & Ors v HMRC [2022] TC08474

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