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Substance over form: A UK judgment about the avoidance of capital gains tax

Friday, 24 May 2019   (0 Comments)
Posted by: Authors: Louis Botha and Tsanga Mukumba
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Authors: Louis Botha and Tsanga Mukumba (Cliffe Dekker Hofmeyr)

In the United Kingdom, capital gains tax (CGT) under the Taxation of Chargeable Gains Act, 1992 (TCGA) is charged, inter alia, where a taxpayer disposes of an asset for an amount greater than the base cost at which such taxpayer initially purchased the asset.

The TCGA contains several types of anti-avoidance provisions where a transaction is not conducted on an arm’s length basis, including rules that deem such a disposal to be at market value and set a time of disposal where connected parties seek to arrange their affairs to defer a CGT liability.

In Trustees of the Morrison 2002 Maintenance Trust and Others v Revenue and Customs Commissioners [2019] EWCA Civ, the Court of Appeal, Civil Division, had to decide whether the taxpayers were liable for CGT, where they disposed of shares in a manner that was perceived to be done with the intention of avoiding a CGT liability.

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