T Watts v HMRC

In T Watts v HMRC [2022] UKFTT 408 (TC) (7 November 2022) the First-tier Tribunal (FTT) decided in favour of HMRC denying a taxpayer a substantial tax loss which purportedly arose in connection with a disposal of gilt strips under a tax avoidance scheme.

The gilt strips scheme broadly involved the following steps:

• the acquisition of gilt strips with a value of circa £1.5m by the taxpayer using borrowed funds;
• the grant of an option to buy the gilt strips to an interest in possession (IIP) trust of which the taxpayer was the settlor and life tenant for a premium of circa £1.3m with an exercise price of circa £150 000;
• the assignment of the option in respect of the gilt strips to a bank (Investec) for a payment to the trustee of the IIP trust of circa £1.3m; and
• exercise of the option by Investec...