Michael Bruce-Mitford v HMRC

In Michael Bruce-Mitford v HMRC [2014] UKFTT 954 (14 October 2014) the FTT found that deferred shares were convertible securities.

The shares in Mr Bruce-Mitford’s company VFB Holidays were acquired by VFB Group in a share for share exchange. Mr Bruce-Mitford additionally acquired 270 000 deferred shares in VFB Group.

In the 2006/07 tax year Mr Bruce-Mitford sold 310 000 ordinary shares. The issue was whether an income tax charge arose on the disposal of the shares on the basis that the deferred shares were ‘convertible securities’ (ITEPA 2003 s 436 as amended with effect since 1 September 2003).

The FTT found that the deferred shares were ‘convertible securities’. This was because the articles of the company made provision for the conversion of the deferred shares into ordinary shares. The deferred shares were therefore ‘employment related convertible securities’ for the purposes of ITEPA 2003 ss...