Katarina Poznic v The Commissioners for HMRC

Facts

The Appellant, Katarina Poznic, was a director and later an employee of StudioAnyo Architects Limited. The company was an architectural practice incorporated in 2011 as Maja Architects Limited, and it had adopted modified model articles under the Companies (Model Articles) Regulations 2008, which were never amended. Mr James Walsh originally held its single ordinary share. On 15 March 2015, shortly after the Appellant became a director, the Company allotted a further 99 ordinary shares to Mr Walsh and 100 'B' ordinary shares to her. The return of allotment (form SH01) recorded that the B shares had no voting rights and no rights on a winding up, but ranked equally for dividends. The Company's persons with significant control notification recorded Mr Walsh as holding 75% or more of the voting rights, and later confirmation statements recorded the shareholdings as unchanged. The Appellant resigned as a director in February 2017 but remained an employee. On 20 October 2020 she sold her B shares to Mr Walsh for £475,000, declaring a gain of £474,900 and claiming £462,600 of Business Asset Disposal Relief (formerly Entrepreneurs' Relief). After an enquiry, HMRC issued a closure notice under sections 28A(1B) and (2) of the Taxes Management Act 1970. It disallowed the relief because the requirement in section 169S(3)(b) of the Taxation of Chargeable Gains Act 1992 was not met, and increased her capital gains tax by £46,260. A statutory review upheld that conclusion. The Appellant appealed to the First-tier Tribunal, arguing that under the Articles her shares ranked pari passu with the ordinary shares and that the Companies House filings were inaccurate.