In Morrison, the Upper Tribunal overturned the decision of the FTT, finding that a payment made in settlement of a High Court action was not a contingent liability for the purposes of TCGA 1992 s 49. The case demonstrates the importance of establishing a clear link between the payment arising from the warranty or representation, and the sale of the asset. In connection with a sale of shares, directors will need to take care when making representations that they are making them as shareholder and not as director. In order to avoid a challenge on the basis of this decision, it will be important to ensure that the contingency is borne pro-rata to the shareholdings in the company. If only some of the shareholders bear the cost of a contingency, HMRC is likely to challenge the link between the payment and the sale of shares.
