HMRC v S Warshaw

In HMRC v S Warshaw [2020] UKUT 366 (TCC) (23 December 2020) the Upper Tribunal (UT) agreed with the First-tier Tribunal (FTT) that cumulative fixed rate preference shares were ordinary share capital for entrepreneurs’ relief purposes and for tax purposes more widely because the dividends were calculated on a compound basis (as a percentage of the aggregate of the subscription price and any previously unpaid dividends). Entrepreneurs’ relief has since been renamed as business asset disposal relief.

The taxpayer had claimed entrepreneurs’ relief on a share disposal. One of the conditions for the disposal to qualify for relief was that the company should be the taxpayer’s ‘personal company ’ which in turn required him to hold a certain percentage of the company’s ordinary share capital. He held a mixture of ordinary and preference shares and the arithmetic was such that the company could only be...