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The Union Castle Mail Steamship Company v HMRC

In The Union Castle Mail Steamship Company v HMRC [2016] UKFTT 526 (27 July 2006) the FTT found that a scheme implemented to transfer derivative contracts between group companies without crystallising a tax charge had failed.

Union Castle was a wholly owned subsidiary of Caledonia. The board of Caledonia had believed there was a significant risk of a fall in the UK equity markets; and had decided to protect the value of Caledonia’s investment portfolio by purchasing a series of FTSE 250 put options. In order not to imperil Caledonia’s investment trust status the purchase had been made by Union Castle. It was subsequently decided that Caledonia itself could purchase FTSE options as a legitimate part of its investment activity.

Consideration was given to novating the derivatives contracts from Union Castle to Caledonia but a tax charge would be crystallised in Union Castle based on the value...

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