The Executors of Paul Hunt & Ors v The Commissioners for HMRC

Facts

Golf Holdings Ltd ("GHL"), incorporated in 2001 and at all material times a close company, acquired the shares in Wine Inns Ltd, James McCabe Ltd and City of Belfast Warehousing Ltd in 2002. The three appellants — Mr Paul Hunt (now represented by his executors), Mr James Hunt and Mr Robert Davis — exchanged their shares in those subsidiaries for shares in GHL, with £32,944,500 credited to GHL's share premium account. After a capital reduction in March 2010, GHL carried out a further reduction of capital on 22 April 2015, cancelling 1,000,000 shares and crediting £10 per share to the appellants' loan accounts: £7,841,000 to Paul Hunt and £1,079,500 each to James Hunt and Robert Davis. GHL then had distributable reserves exceeding £10,000,000. The appellants returned the consideration as capital subject to capital gains tax. HMRC issued notices under section 695 of the Income Tax Act 2007, the appellants made statutory declarations under section 696, HMRC made counter-statements under section 697, and on 4 April 2022 HMRC issued counteraction notices and assessments under the transactions in securities legislation in Chapter 1 of Part 13 of the Income Tax Act 2007. The appellants' appeals, joined by the First-tier Tribunal, were dismissed, and they appealed to the Upper Tribunal.