Gift holdover relief (under TCGA 1992, s 165) was precluded (under s 167(2)) on an individual’s gift of goodwill to a UK company, as control of the company was attributed to the transferor’s wife (among others) who were not resident or ordinarily resident in the UK.


The appellant, a US citizen who was neither resident nor ordinarily resident in the UK, disposed of his interest (including goodwill) in a business carried on by a limited liability partnership (B), transferring it by way of a gift on 1 April 2010 to a new UK incorporated and resident company (W Ltd), of which he was the sole shareholder and director.

Although the appellant was not resident or ordinarily resident in the UK, his share of the goodwill of the business was a chargeable asset in relation to him for capital gains tax (CGT) purposes. A proposed emigration of B would have triggered a deemed disposal of that share (under TCGA 1992, s 25(3)).

Following the gift of substantially the whole of his business interest, in December  2011  the appellant and W Ltd made a gift relief claim under TCGA 1992, s 165, and amended his tax return for 2009/10.

HM Revenue and Customs (HMRC) opened an inquiry into the return, and subsequently issued a closure notice disallowing the holdover relief claim, on the basis that it was precluded by s167(2). The appellant appealed. The parties agreed that  HMRC’s interpretation  was  correct  on  a  literal  interpretation of s 167(2), because the appellant ‘s wife (among others) was at the  time  of  the  disposal  neither resident nor ordinarily resident in the UK and, as an ‘associate’ of his, could be deemed to  ‘control’ W  Ltd.

Decision- Gift holdover relief claim

The sole issue for the First-tier Tribunal (FTT) was whether W Ltd was within s 167(2) when it was given a purposive interpretation. If it was, then it was agreed that by virtue of s 167(1), section 165(4) did not apply, and therefore the disposal did not qualify for holdover relief. However, if it was not, then it was agreed that the disposal did qualify.

It was contended on behalf of the appellant that as a literal construction of s 167 would produce an irrational, arbitrary, unjust and absurd result a purposive interpretation should be adopted, allowing the claim to holdover relief. Alternatively, it was argued that, if the statutory language did not admit such a purposive interpretation, a literal construction should not be applied as s 167 does not conform to Article 1 of the First Protocol (AlPl) (i.e. protection of property) or Article 14 (i.e. the right not to be discriminated against) of the European Convention on Human Rights (ECHR); neither did it conform to European Union (EU) law, in that it restricted the free movement of capital.

However, the FTT was unable to conclude that Parliament necessarily intended control for the purposes of s 167(2) to refer to ‘real’ as opposed to ‘fictional’ control. It, therefore, followed that ICTA 1988, s 416(6) (which attributed the appellant’s control of the company to his non-resident wife and children) could not be disapplied. Consequently, holdover relief was precluded by s167(2).

The FTT went on to consider whether ICTA 1988, s 416(6) should be disapplied for non-compliance with the ECHR or EU law. However, it was unable to conclude that s 167 was devoid of reasonable foundation amounting to a breach of the appellant’s rights. Furthermore, the appellant not been treated differently to any other person with a non-UK resident wife and children, and therefore had not been subject to any discrimination (within Article 14). The appellant’s EU law arguments were also unsuccessful. His appeal was dismissed.