Hancock and Another v Revenue and Customs: SC 22 May 2019

The taxpayers sold their shares in return for loan notes in the form of mixed qualifying (QCB) and non qualifying corporate bonds (Non-QCB) within section 115 of the 1992 Act. Gains on the disposal of QCB would be exempt from CGT. These were then converted to QCBs. The court was asked as to their chargeability on disposal and whether this was a single or two separate conversions.
Held: The taxpayers’ appeal was dismissed.
‘Plainly, section 116(1)(b) contemplates the possibility of a single transaction which involves a pre-conversion holding of both QCBs and non-QCBs, and this, coupled with the fact that the Court of Appeal’s interpretation renders the words ‘or include’ appearing in section 116(1)(b) otiose are powerful arguments in support of the appellants’ construction. . . However, the appellants’ interpretation result would be inexplicable in terms of the policy expressed in these provisions, which is to enable all relevant reorganisations to benefit from the same rollover relief. Taxpayers could avoid those provisions with extreme ease if the appellants are right. There would be nothing to prevent them from using the occasion of a minimal conversion (say pounds 1 nominal QCB) following a reorganisation and obtaining relief from CGT which was plainly contrary to and inconsistent with that which was intended to apply to a conversion connected to a reorganisation.


Lord Reed, Deputy President, Lord Sumption, Lord Carnwath,Lord Briggs, Lady Arden


[2019] UKSC 24, [2019] BTC 15, [2019] STI 1127, [2019] 3 All ER 473, [2019] STC 1084, [2019] 1 WLR 3409, [2019] WLR(D) 346


Bailii, Bailii Summary, WLRD, SC, SC Summary, SC Summary Video, SC 2018 Dec 06 am Video, SC 2018 Dec 06 pm Video


Taxation of Chargeable Gains Act 1992 115, Finance Act 1997 88(2) 116(1)(b) 127 132


England and Wales


At FTTTxHancock and Hancock v Commissioners for Inland Revenue and Customs FTTTx 21-Jul-2014
FTTTx Capital gains tax – redemption of qualifying corporate bonds (QCBs) – scheme to avoid the application of s 116, TCGA to a conversion of non-QCBs into QCBs – s 116(1)(b) – whether a single conversion of . .
At UTTCRevenue and Customs v Hancock and Another UTTC 18-Feb-2016
UTTC Capital gains tax – redemption of qualifying corporate bonds (QCBs) – scheme to avoid the application of s 116 TCGA to a conversion of non-QCBs into QCBs – s 116(1)(b) and s 132 – whether a single . .
Appeal From (CA)Hancock and Another v Revenue and Customs CA 25-May-2017
interaction of the rules which relate to corporate reorganisations and those which relate to qualifying corporate bonds . .
CitedInland Revenue v Luke HL 15-Jan-1963
Income Tax, Schedule E-Benefit in kind-Director in occupation of company’s house-Expenditure by company on repairs and upkeep in excess of rent- Income Tax Act, 1952 (15 and 16 Geo. VI and 1 Eliz. II, c. 10), Sections 161 and 162. . .
CitedW T Ramsay Ltd v Inland Revenue Commissioners HL 12-Mar-1981
The taxpayers used schemes to create allowable losses, and now appealed assessment to tax. The schemes involved a series of transactions none of which were a sham, but which had the effect of cancelling each other out.
Held: If the true nature . .
CitedJenks v Dickinson (Inspector of Taxes) ChD 16-Jun-1997
Legislation which created a clear anomaly can be interpreted so as to avoid the anomaly if the words used are sufficiently ambiguous as to allow an alternative construction.
Neuberger J discussed the case of Marshall v Kerr, saying: ‘It appears . .
Lists of cited by and citing cases may be incomplete.

Capital Gains Tax

Updated: 09 February 2022; Ref: scu.638151