B Khan v HMRC

Our pick of this week's cases

In B Khan v HMRC [2020] UKUT 168 (TCC) (2 June) the Upper Tribunal found that the taxpayer had received a distribution consisting of the proceeds of a share buyback and was subject to income tax on that amount. 

The taxpayer bought all 99 shares in a company with significant distributable reserves. Rather than procuring a pre-sale dividend the previous shareholders sold the company complete with the reserves with the intention that they would receive a capital gain and claim entrepreneurs’ relief. They sold the shares to the taxpayer for £1.95m and on the same day the company bought back 98 of the shares for £1.95m leaving the taxpayer holding a single share. 

HMRC assessed the taxpayer to income tax on the basis that he had received a distribution of £1.95m (the buyback proceeds) from the company. The taxpayer argued that he should instead...