Eileen O’Sullivan v D Philip (HMIT) (2005)


The qualifying holding period for taper relief for the purposes of the Taxation of Chargeable Gains Act 1992 s.2A(8) was not the whole period from the date of acquisition but was the period after April 5, 1998 for which the asset had been held at the time of its disposal.


The appellant taxpayer (S) appealed against the special commissioner's decision ((2004) SpC 437) confirming an amendment made by the respondent Revenue to an amendment made by S to her self-assessment return for the year ended April 5, 2000. S had sold her single share in a close company in 1999 and the net proceeds of sale were £1,229,790. The share had been purchased in 1989 for £1. Indexation relief of 43 per cent (43p) was available, leaving a net gain on sale of £1,229,788.58. S's self-assessment tax return for 1999/2000 showed a taper relief reduction of 15 per cent in respect of the gain, and therefore a taxable gain of £1,045,320.29. S had subsequently submitted an amendment reducing the tax due, on the basis that the taper relief reduction should have been 75 per cent because the qualifying holding period under the Taxation of Chargeable Gains Act 1992 s.2A(5) was 10 years or more. The Revenue had enquired into the amendment, and made a change reversing S's amendment on the ground that the holding period was, under the terms of s.2A(8), the period after April 5, 1998, for which the asset had been held, plus one year so that the period was two years. S submitted that, on the proper construction of s.2A, taper relief applied to the whole period when the asset was held and not merely to the period after April 5, 1998.


There was no basis for S's argument that the ordinary meaning of the expression "had been held" in s.2A(8) was apt to include the whole of the period from acquisition in 1989. The plain meaning of the subsection was that the qualifying period was the period after April 5, 1998 for which the asset had been held at the time of its disposal, namely just over a year. The expression "had been held" was inevitable as a matter of grammar since ex hypothesi the asset had been disposed of, and the expression "has been held" would be wrong on any view. In addition it would be anomalous if both indexation allowance and taper relief were available for the same period. The special commissioner had plainly been right to decide that taper relief was to be granted on the basis of a qualifying period of one year, plus one "bonus" year under s.2A(8)(b).

Appeal dismissed.