Neil Fraser v Revenue & Customs Commissioners (SpC530) (2006)
A redetermination of the length of a qualifying period for the purposes of retirement relief under the Taxation of Chargeable Gains Act 1992 Sch.6 para.14 required that all the relevant conditions referable to a period in order that it might count as a "qualifying period", including the "personal company" test, had to be satisfied in respect of an extended qualifying period.
The appellant taxpayer (F) appealed against an amendment made to his self-assessment for the year 1996/97 resulting in additional capital gains tax being due. F had been an employee of a company (H). He did not own shares or have voting rights in H. In 1991, H had been taken over by another trading company (C) of which F was a director and able to exercise at least five per cent of the voting rights. In 1996, F disposed of his 84.29 per cent shareholding in C and a chargeable gain accrued. F’s disposal of shares in C was a material disposal of business assets for the purposes of retirement relief under the Taxation of Chargeable Gains Act 1992 s.163 because throughout a period of at least one year, ending with the date of disposal, C was a trading company and F was a full-time working officer or employee, and C was F's "personal company" because more than five per cent of the voting rights in C were exercisable by him. The disposal was also a "qualifying disposal" for the purposes of Sch.6 and the amount of relief available was ascertainable by reference to the "qualifying period" under that schedule. F contended that the qualifying period of five years, during which the conditions of s.163 were satisfied in relation to C, should be extended to 10 years because of F's involvement before 1991 with H as a previous business within Sch.6 para.14 . The Revenue submitted that F's involvement with H as a previous business could not extend the qualifying period as the conditions of s.163 were not satisfied in relation to H because F had not had at least five per cent of the voting rights in it so that it was not his personal company.
The provisions of Sch.6, in particular para.14(7) and para.14(8) , indicated that a redetermination of the length of a qualifying period required that all the relevant conditions referable to a period so that it might count as a "qualifying period" had to be satisfied in respect of an extended qualifying period. Therefore, the "personal company" test had to be satisfied in relation to any company that, at any time during a putative extended qualifying period, owned the business that was assumed to be the same business as the business at retirement by virtue of Sch.6 para.14(2) . That conclusion was in accordance with the statutory purpose of the retirement relief code, which was to allow a just measure of retirement relief even where the disposal that gave rise to the gains sought to be relieved was a material disposal of business assets occurring after a relatively short period of ownership, and those business assets were acquired on a reinvestment of other business assets owned during the 10-year period, which was relevant for the calculation of the appropriate percentage under Sch.6 para.13 . On that basis, an extended qualifying period under para.14 of Sch.6 would require an earlier disposal of business assets during the 10-year period, and that was what was lacking in F's case. Since H was not F's personal company, the length of the qualifying period could not be extended under para.14 and was five years. Therefore, the amount of retirement relief to which F was entitled in respect of the gains accruing on the disposal was the amount allowed by the Revenue.