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R Alberg v HMRC

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In R Alberg v HMRC [2016] UKFTT 621 (5 September 2016), the FTT found that shares had not been issued to the appellant, so that share loss relief under ITA 2007 s 131 was not available to him.

Mr Alberg had entered into a business venture with a partner, Mr Patel, which had involved buying a specialist food snacks and drinks business in financial difficulties from a company in administration and then running the business. The business had then been incorporated and Mr Alberg and Mr Patel had become directors of the company.

The venture quickly proved unsuccessful, administrators were appointed and the company was dissolved. Mr Alberg wished to claim share loss relief and the issue was whether the company had issued shares to him in consideration of the £250,000 he had invested in it – in addition to his subscriber shares.

Mr Alberg mainly relied on an email sent to him by his solicitor based in the City and which attached a draft shareholders’ agreement. However, the FTT was not prepared to accept that ‘the fact that solicitors based in the City of London produced a draft agreement for certain things to be done means that, on the balance of probabilities, those things were done’. Mr Alberg was an equity investor as the holder of one share, so that his further investment of £250,000 would have enhanced the value of his equity investment. However, share loss relief was not available in the absence of an issue of shares.

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Why it matters: The FTT accepted that ‘this may appear an inequitable outcome from the appellant’s perspective, given that he actually invested, and lost, £250,000’. However, Parliament had specifically required that the shares be issued to the taxpayer for share loss relief to apply. Entrepreneurs investing in their companies should always ensure that their investment is well documented, so that they can obtain the relevant reliefs.

Issue: 1324
Categories: Cases , Employment taxes