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Vocalspruce Ltd v HMRC

In Vocalspruce Ltd v HMRC [2014] EWCA Civ 1302 – 30 October 2014 the Court of Appeal found that under the related party rule a scheme failed which involved the intra-group acquisition of loan notes. The notes were transferred in consideration for the issue of shares at a premium paid up by capitalising profits and appropriating those to a share premium account.

This was a lead case in which both the FTT and the UT had found against Vocalspruce.

The first issue was the scope of FA 1996 s 84(2)(a) which excludes from the profits gains and losses to be taken into account in respect of loan relationships ‘any amounts required to be transferred to the company’s share premium account’. The scheme could only be successful if the accrued profits on the loan notes fell within the scope of the provision.

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