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T Watts v HMRC

In T Watts v HMRC [2024] UKUT 168 (TCC) (12 June) the UT dismissed the taxpayer’s appeal confirming that a scheme intended to create a substantial income tax loss from transactions in gilt strips without incurring an equivalent economic loss did not work.

The scheme broadly involved the following steps: the acquisition of gilt strips with a value of £1.5m by the taxpayer using borrowed funds; the grant of an option to buy the gilt strips to an interest in possession trust of which the taxpayer was the settlor and life tenant for a premium of approximately £1.35m with an exercise price of £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 trust of £1.35m; and exercise of the option by Investec with the corresponding payment of the exercise price of...

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