[2014] UKFTT 11 (TC)
TC03152
Appeal number:
TC/2012/06837
CAPITAL
GAINS TAX – negligible value claim – asset a certificate of deposit denominated
in sterling in an overseas bank which accounted in US dollars – the bank went
into administration and later liquidation and was the subject of a complaint by
the Securities and Exchange Commission alleging fraud – whether asset was a
debt denominated in sterling – held it was – whether the appellant’s claim in
the liquidation in respect of the CD was a separate asset for CGT purposes –
held it was not – appeal dismissed
FIRST-TIER TRIBUNAL
TAX CHAMBER
|
|
GORDON L WESTON
|
Appellant
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
THE
COMMISSIONERS FOR HER MAJESTY’S
|
Respondents
|
REVENUE
& CUSTOMS
TRIBUNAL: JUDGE JOHN
WALTERS QC
SONIA
GABLE
Sitting in public at Bedford Square , London on 13 June 2013
David Southern, Counsel, for
the Appellant
Kim Sukul, Presenting Officer,
HM Revenue & Customs, for the Respondents
© CROWN COPYRIGHT
2013
DECISION
Introductory
1. The
appellant, Mr Weston, appeals against closure notices, dated 28 February 2012,
issued by the Respondents (“HMRC”) in respect of two tax years, 2008/09 and
2009/10. The closure notices include amendments to Mr Weston’s self-assessment
tax returns for those tax years, adding £79,227 and £33,498 respectively to the
self-assessments in those returns. The basis for these amendments is the
disallowance by HMRC of relief for capital losses claimed in those tax years,
of £440,151 and £186,100 respectively.
2. On filing
his self-assessment tax return for the tax year 2008/09, which was effected for
him by Stuart Dick & Co Limited (“Stuart Dick”) (chartered accountants)
on-line, Mr Weston made a negligible value claim (pursuant to section 24 Taxation of
Chargeable Gains Act 1992 (“TCGA”)) to the effect that his claim against
Stanford International Bank Limited – in Liquidation (“SIB”) had become of
negligible value while owned by him. He claimed to utilise some of the loss to
which the negligible value claim gave rise against declared capital gains of
£540,578 in 2008/09 and £196,200 in 2009/10.
3. Stuart
Dick wrote a letter dated 25 November 2009 to HMRC in which it was stated that
they had ‘recently’ submitted Mr Weston’s return for the tax year 2008/09
on-line. However the hard copy of the information submitted which was with our
papers indicates that the return was in fact submitted on 1 December 2009. It
stated, under the heading ‘Capital Gains Summary’ that total gains in the year,
before losses, were £540,578 and that total losses for the year were
£1,022,534. This latter figure referred to the loss claimed by virtue of the
negligible value claim.
4. Mr
Weston’s claim against SIB had arisen pursuant to an investment made by him in
a non-negotiable Certificate of Deposit issued to him by SIB on 19 June 2006
(“the CD”).
5. The CD (a
copy of which was with our papers) records that it is ‘subject to [SIB’s]
General Terms and Conditions and applicable Deposit Terms’. It also records
that ‘[u]nless otherwise stated, all amounts specified are in U.S. Dollars or
an equivalent amount if deposits are made in currency other than U.S.
Dollars’.
6. The CD
records that the depositor is Mr Weston and the amount is ‘1,000,000’ and the
currency is ‘GBP’. It also records that ‘This FIXED CD – GBP – 36 MONTHS
matures on 19-JUN-2009’, that the CD matures on the maturity date (i.e. 19 June
2009) and that interest to the maturity date would accrue at the base rate of
8.454% and that the annual yield would be 9.62%. The CD indicates that it was
executed by an authorised signatory of SIB at St John’s, Antigua, West Indies.
7. The letter
to HMRC dated 25 November 2009 from Stuart Dick indicated that the basis for
the negligible value claim was e-mail correspondence between Mr Weston and the
liquidators of SIB. An email from Nigel Hamilton-Smith, Joint Liquidator of
SIB, to Mr Weston dated 13 July 2009 with our papers stated that ‘Account No.
148304 1136149.22 (GBP)’ was ‘Agreed’ and also two other accounts, one in
‘(USD)’ and one in ‘(GBP)’ both ‘0.00’ were also ‘Agreed’, and that the
liquidators could not ‘at this stage estimate the quantum and timing of any
dividend to investors’ adding that ‘[i]t is, however, not anticipated that any
distribution will be available before January 2010’.
8. Stuart
Dick added, in their letter to HMRC dated 25 November 2009, that ‘the latest
indications are a 10 pence in the pound distribution to Depositors’ and that on
this basis Mr Weston had claimed a capital loss in his tax return for 2008/09
of £1,022,534, being 90% of £1,136,419 – the amount of his claim agreed by the
liquidators. That amount appears to comprise both the initial deposit of
£1,000,000 and outstanding interest due under the CD but unpaid.
9. The issues
for our decision are (1) whether Mr Weston’s investment represented by the CD
constituted a chargeable asset for capital gains tax (“CGT”) purposes; and (2)
if so, whether that asset became of negligible value for the purposes of
section 24, TCGA, at the time when Mr Weston’s claim was made in the tax year
2008/09.
10. Besides the documents with
our papers, we received a Witness Statement and oral evidence from Alan David
Pink, a chartered accountant and tax adviser, on the factual valuation issue of
whether the CD had a negligible value in the tax year 2008/09.
11. From the evidence we find
the following facts.
Facts
12. As stated above, Mr Weston
made his investment in the CD on 19 June 2006. The CD incorporated rights in
favour of Mr Weston as against SIB, as described above.
13. On 19 February 2009 the
Stanford group, of which SIB was a part, was put into administration, Nigel
Hamilton-Smith and Peter Wastell of Vantis plc being appointed receivers and
managers of SIB following the issue of a restraining order obtained by the
Securities and Exchange Commission in the USA denying SIB access to its bank
accounts. On 15 April 2009 SIB was put into liquidation, Nigel Hamilton-Smith
and Peter Wastell being appointed Joint Liquidators of SIB.
14. On 22 February 2009, a
statement was issued to Mr Weston by SIB. There was no copy of this statement
with our papers, but both parties referred to it in their respective Skeleton
Arguments. The statement showed a principal balance of £1,000,000, an interest
balance of £136,149.22, and an aggregate ‘ending balance’ of £1,136,149.22
(referring to ‘pound sterling’ numbered accounts) and a statement of those
balances ‘expressed in US Dollars’ as follows: principal - $1,425,516.75;
interest - $194,082.99; and ending balance - $1,619,599.74. The ‘ending
balance’ so expressed in US Dollars appeared in the Summary box on the
statement.
15. There is with our papers a
copy of the ‘First Amended Complaint’ filed on 27 February 2009 in the US
District Court for the Northern District of Texas, Dallas Division, by the
Securities and Exchange Commission against SIB and other Stanford group
companies, as well as R Allen Stanford, James M Davis and Laura
Pendergest-Holt. The allegations were, in summary, that for at least a decade R
Allen Stanford and James M Davis, through companies they controlled, including
SIB, ‘executed a massive Ponzi scheme’, and that in carrying out the scheme
Stanford and Davis misappropriated billions of dollars of investor funds and
falsified SIB’s financial statements in an effort to conceal their fraudulent
conduct.
16. There is with our papers a
copy of a letter written apparently to all creditors of SIB by the Joint
Liquidators and dated 13 May 2009. Amongst other information it states that
‘Fixed CDs’ of the type of the CD issued to Mr Weston were fixed term deposits
with terms ranging from 3 months to 60 months. The longer the term of the
deposit, the higher the interest rate offered. The letter states that
‘[c]lients could invest in multiple currencies including US Dollars, Euros,
Canadian Dollars and Sterling’. Unlike in the case of flexible deposits, it
appears that withdrawals were not permitted during the term of a ‘Fixed CD’.
17. The letter written by the
Joint Liquidators, dated 13 May 2009, also stated that as of 19 February 2009
the records of SIB indicated that it had 27,992 active clients and owed a total
of US$7.2 billion to its depositors, which included accrued interest. The
letter also stated that the Joint Liquidators’ investigations had established
that, as of close of business on 18 February 2009, SIB’s records detailed cash
balances held of US$46 million. The Joint Liquidators’ investigations had also
indicated that SIB held other investment assets and non-investment assets, but
no accurate confirmation of their value was given. The Joint Liquidators’
‘current estimate’ of SIB’s assets was less than US$1 billion.
18. Some time before 13 July
2009, Mr Weston made an on-line claim in the liquidation of SIB and, as stated
above, received an email on that date from Nigel Hamilton-Smith, Joint
Liquidator of SIB, to the effect that his claim in respect of a numbered
account in ‘GBP’ (i.e. pounds sterling) to the value of £1,136,149.22 was
‘registered and agreed’ by the liquidators.
19. Some time between 13 July
2009 and 25 November 2009, Stuart Dick received what they regarded was an
authoritative indication that a dividend of 10 pence in the pound would be paid
to investors in SIB.
20. The negligible value claim
was made either in the return for the tax year 2008/09 filed on-line on 1
December 2009 or, more likely, in Stuart Dick’s letter to HMRC dated 25
November 2009.
21. On 26 November 2010, HMRC
opened an enquiry into Mr Weston’s return for the tax year 2008/09. As a result
of the enquiry the capital loss of £1,022,534 claimed by way of the negligible
value claim was disallowed.
22. In December 2010, Mr
Weston’s return for the tax year 2009/10 was filed on-line. It was completed on
the basis that chargeable gains arising to Mr Weston in that year (of £196,200)
were covered, in whole or in part, by allowable capital losses carried forward
(being unused losses arising in respect of the negligible value claim).
23. On 22 June 2011, HMRC opened
an enquiry into Mr Weston’s return for the tax year 2009/10. As a result of
the enquiry, loss relief claimed to be utilised in 2009/10 referable to the
negligible value claim (brought forward losses) was disallowed.
24. In or around May 2011,
Nigel Hamilton-Smith and Peter Wastell were removed from office and replaced as
Joint Liquidators of SIB by Marcus Wide and Hugh Dickson of Grant Thornton. In
October 2011 the liquidation was still ongoing and the quantum of the dividend
which would eventually be paid to investors remained uncertain.
25. On 29 May 2012 Mr C W Agg,
HM Inspector of Taxes, Local Compliance, Appeals and Reviews wrote to Mr Weston
following a review and confirming HMRC’s decision to disallow the loss claimed
by the negligible value claim. The notice of appeal to this Tribunal was
lodged on 28 June 2012.
26. On 1 June 2012 Marcus Wide
and Hugh Dickson of Grant Thornton (BVI) wrote to Mr Weston notifying him that
the claim made by him against SIB had been ‘allowed in the amount of USD
$1,339,526.52’, though no explanation was given of the difference between this
amount and the amount of the ‘ending balance’ of $1,619,599.74 referred to in
the statement dated 22 February 2009 issued to Mr Weston by SIB.
27. Mr Pink’s evidence was that
in his opinion the expectation of a recovery of 10 pence in the pound would not
render the asset concerned of negligible value. However, his view was that the
circumstances surrounding the fraud allegations made by the Securities and
Exchange Commission in respect of SIB in February 2009 ‘constituted a major
financial shock by any standards, and it is not conceivable that any prudent
purchaser would have been willing to lay out good money to acquire an
investment in such an organisation’ and that Mr Weston’s investment (the CD)
‘would in all probability have been unsaleable in February 2009 in the open
market in a sale by private treaty at arm’s length. Its value therefore was,
within the sense of that term as used in the statute (as [Mr Pink]
understand[s] it), negligible.’
The
submissions
28. Mr Southern, for Mr Weston,
submitted that the asset held by Mr Weston was a dollar asset, being either
foreign currency (US Dollars) within section 21(1)(b) TCGA or a foreign
currency (US Dollar) bank account within section 252(1) TCGA. Alternatively,
he submits that Mr Weston had a right of action against SIB ‘either acquired
for the cost of that asset or derived from that asset’. The right of action
was a chargeable asset which became of negligible value in 2008/09.
29. Ms Sukul, for HMRC,
submitted that the asset held by Mr Weston was not a dollar asset but was a
debt denominated in sterling, so that section 252(1) TCGA does not apply to it
but, pursuant to section 251(1) TCGA no chargeable gain (or allowable loss) can
accrue to the original creditor (Mr Weston) on the disposal of the debt.
30. Section 21(1)(b) TCGA
provided relevantly as follows:
‘(1)
All forms of property shall be assets for the purposes of this Act, whether
situated in the United Kingdom or not, including-
...
(b)
currency, with the exception (subject to express provision to the contrary) of
sterling.’
31. Section 251(1) TCGA provided
relevantly as follows:
‘(1)
Where a person incurs a debt to another, whether in sterling or some other
currency, no chargeable gain shall accrue to that (that is the original)
creditor or his personal representative or legatee on a disposal of the debt,
except in the case of the [sic] debt on a security (as defined in
section 132).’
32. Section 252(1) TCGA
provided relevantly as follows:
‘...
section 251(1) shall not apply to a debt owed by a bank which is not in
sterling and which is represented by a sum standing to the credit of a person
in an account in the bank.’
33. Ms Sukul further submitted
that the debt was not a debt on a security (as defined in section 132), but Mr
Southern did not pursue a case that the debt, if not a dollar asset but a debt
denominated in sterling, was a debt on a security, because, if so, he accepted
that it would be a qualifying corporate bond within section 117 TCGA, and a
gain on the disposal of it would not be a chargeable gain (section 115(1) TCGA)
with the consequence that a loss on the disposal of it would not be an
allowable loss for CGT purposes. We do not therefore decide whether or not the
CD was a debt on a security.
34. Ms Sukul also submitted that
if (contrary to her submission) the asset held by Mr Weston was a dollar asset
as submitted by Mr Southern, nevertheless it did not become of negligible value
for relevant purposes during the tax year 2008/09. In HMRC’s submission the
phrase ‘of negligible value’ means ‘next to nothing’, and would not cover an
expectation of a dividend of 10 pence in the pound, which was, she submitted,
according to the evidence, what was anticipated by Stuart Dick in their letter
dated 25 November 2009, and no event between that time and 6 April 2010 (the
end of the tax year 2009/10) had occurred to change that expectation.
35. Mr Southern expanded his
submissions by arguing that the fraudulent nature of the business of SIB should
cause the Tribunal to hesitate to take at face value the description which SIB
applied to Mr Weston’s deposit. In other words, the formal description of the
CD as fixed deposit denominated in sterling (£1,000,000) should not be
determinative of the nature of the asset. On the contrary, Mr Southern relied
on the evidence that SIB’s monetary assets were denominated in US Dollars and
that its financial statements were drawn up in that currency, including the
complaint of the Securities and Exchange Commission, to submit that the asset
held by Mr Weston was a dollar asset, being either foreign currency (US
Dollars) or a foreign currency (US Dollar) bank account. He submitted that the
acceptance on 1 June 2012 by the Joint Liquidators of SIB of Mr Weston’s claim
in the amount of $1,339,526.52 showed the reality of the nature of Mr Weston’s
asset as a dollar asset.
36. Alternatively, Mr Southern
submitted that the CD was simply an instrument of fraud and that in reality Mr
Weston’s asset was the right to sue SIB for the misappropriation of his funds.
The base cost of this asset was what he paid for it, namely his deposit of £1,000,000,
and the deemed disposal proceeds the ‘negligible value’ supporting his
negligible value claim. Mr Southern urged the Tribunal to recognise for CGT
purposes the loss sustained as a matter of reality and the application of
normal business principles, citing Aberdeen Construction Group Ltd. v IRC 52 TC 281 at 286. He relied on Zim Properties Ltd v Proctor 58 TC 371 at
390, where Warner J stated his decision that a right to bring an action to seek
to enforce a claim that was not frivolous or vexatious, and which could be
turned to account yielding a substantial capital sum, was an ‘asset’ for CGT
purposes.
37. On the question of whether
the CD was of negligible value, Mr Southern submitted that ‘negligible value’
for the purposes of section 24 TCGA is an absolute (as opposed to a relative)
concept and means ‘virtually worthless’ or ‘having no market value’. He cited
the decision of the First-tier Tribunal is Barker v R & C Comrs [2012] SFTD 244. He accepted that a valuation based on a dividend of 10 pence in the
pound in respect of the CD would not produce a negligible value, but relied on
the evidence of Mr Pink in making the submission that as a matter of fact it
would not have been reasonable in February 2009 to expect any recovery from the
deposit made on the issue of the CD. He submitted that Stuart Dick’s
suggestion in correspondence with HMRC that a dividend of 10 pence in the pound
might be expected was purely speculative and should be disregarded as being of
no or insufficient evidential value to rebut Mr Pink’s opinion.
38. Ms Sukul referred us to
section 21 TCGA, which, as indicated above, provides that all forms of property
are assets for CGT purposes including options, debts and incorporeal property
generally, and currency with the exception (subject to express provision to the
contrary) of sterling. She also referred us to section 251 TCGA which, again
as indicated above, provides generally for gains on the disposal of a debt
(other than a debt on a security) by the original creditor not to be chargeable
gains – with the consequence that losses on such a disposal are not allowable
losses for CGT purposes. She acknowledged that section 252 TCGA limits the
application of section 251 so that it does not apply to foreign currency bank
accounts which, accordingly, are debts on the disposal of which chargeable
gains and allowable losses can arise.
39. On the facts, she submitted
that the CD was plainly a debt denominated in sterling (and not in US Dollars)
and the fact that SIB may have converted the £1,000,000 deposited by Mr Weston
into US Dollars and the fact that SIB used US Dollars for its internal
accounting purposes are both irrelevant to the issue before the Tribunal. She
submitted that the amount Mr Weston was entitled to expect on redemption of the
CD was at all times £1,000,000 plus accrued interest rather than the sterling
equivalent of an amount expressed in US Dollars.
40. On the negligible value
issue, Ms Sukul submitted, in effect, that the best evidence of the value of
the CD at the time when Mr Weston made his negligible value claim was Stuart
Dick’s estimate of a dividend of 10 pence in the pound which would value the CD
at £113,615, clearly an amount far in excess of anything that could be
considered of negligible value. She submitted that Mr Weston had not been able
to prove that the CD was really of negligible value at any time prior to 6
April 2010.
41. Ms Sukul responded to Mr
Southern’s submission that Mr Weston had acquired a right to sue SIB for the
misappropriation of his funds at a base cost of £1,000,000 by submitting that
while she accepted that Mr Weston did (or was likely to) have a chargeable
asset in the form of his right to sue SIB, the base cost of that asset would be
nil because it would not have been acquired in consideration for the sum of
£1,000,000 given for the CD, but by way of accretion – being a consequence of
his having acquired the CD and of SIB’s presumed misappropriation of his
funds.
Discussion
and Decision
42. First of all, we address the
nature of the asset acquired by Mr Weston when he made his investment in the
CD, which was issued to him by SIB on 19 June 2006 and in respect of the
acquisition of which he paid to SIB a consideration of £1,000,000 in sterling.
43. We consider that the obvious
and correct analysis of the nature of that asset is that it was a sterling
deposit with SIB. The evidence of the language of the CD confirms this. Mr
Southern suggested to us that the CD was not to be taken at its face value,
because of the fraudulent nature of the business of SIB. He submitted that we
should find that the true nature of the asset was that it was denominated in US
dollars, not sterling, and was more akin to an investment in SIB than a
straightforward deposit.
44. In our judgment there is no
basis for any such finding. The transaction effected between Mr Weston and SIB
was one whereby Mr Weston deposited £1,000,000 with SIB on generous terms as to
interest and subject to conditions as to permitted withdrawals and
negotiability. This transaction set up a relationship of debtor (SIB) and
creditor (Mr Weston) between the parties, it did not confer on Mr Weston any
form of ownership interest in SIB itself. The fraudulent intent and activities
of SIB and persons behind SIB do not, in our judgment, affect the nature of the
transaction or of the asset acquired by Mr Weston. They do, of course, give
rise to rights of action as between Mr Weston and SIB (and maybe others).
45. The fact that SIB may have
converted Mr Weston’s deposit into US dollars and invested it in dollar assets,
and that the replacement Joint Liquidators of SIB have notified Mr Weston that
his claim against SIB has been allowed in a US dollar amount does not affect
the above analysis. Mr Weston’s claim, based on the CD, was and is a sterling
claim against SIB, which, of course, could be satisfied by an equivalent
payment in US dollars.
46. We decide, therefore, that
the asset acquired by Mr Weston was not currency other than sterling (reference
section 21(1)(b) TCGA), and was a debt in relation to which Mr Weston was (and
is) the original creditor and SIB the debtor (reference section 251(1) TCGA).
Furthermore the debt, although owed by SIB, which we find was a bank, was (and
is) in sterling and not in any other currency (reference section 252(1) TCGA).
Neither side argued that the CD was a debt on a security, and we assume
(without deciding) that it was not.
47. In consequence of what is
said above, we hold that no chargeable gain or allowable loss can arise on a
disposal of the CD which, in effect, means that it is not a chargeable asset.
48. We consider next whether Mr
Weston is entitled to the benefit of the loss relief which he has claimed by
reason of his holding an asset not constituted by the CD itself, but by a right
of action against SIB in relation to non-performance (or impaired performance)
by SIB of its obligations under the CD.
49. Warner J’s decision in Zim
Properties Ltd v Procter forms the basis of Mr Southern’s submission. That
case concerned a right of action by a client, Zim Properties Ltd. (“Zim”),
against its solicitors, for damages in negligence arising from advice (or lack
thereof) in relation to a sale of certain properties by Zim which fell through.
A capital sum was derived by Zim in compromise of the action and the question
for decision was whether that capital sum was derived from the right of action
itself or the properties, the sale of which gave rise to the right of action.
Warner J decided that the capital sum was derived from the right of action
which was an ‘asset’ for CGT purposes because it could be turned to account
(being a right of action in respect of a claim that was not frivolous or
vexatious). This had the consequence that the capital sum was treated as a
gain for CGT purposes without any deduction in respect of acquisition
expenditure, but Warner J did not regard this result as ‘contrary to business
sense’ because, as he noted, after receipt of the capital sum, Zim still owned
the properties, unaffected and unimpaired by the fate of the contract which had
fallen through (see: ibid. at 58 TC 391H). Warner J said that ‘the
reality of the matter is still that the [capital sum] was derived by Zim from
its right to sue [the solicitors] rather than from the properties’ (ibid. at
58 TC 394D/E).
50. Warner J also noted his view
that not every right to a payment is an ‘asset’ for CGT purposes and gave
‘perhaps the most obvious example’ as being the right of a seller of property
to the payment of its price. There, he noted, the relevant asset was the
property itself (ibid. at 58 TC 392F/G).
51. In the light of Zim
Properties, our decision is that although Mr Weston indeed had a right of
action against SIB, acquired when the investment in the CD was made by him on
19 June 2006 or at some later time, that right is not a separate ‘asset’ for
CGT purposes, because it is merely one of the rights which he holds by virtue
of holding the CD itself. It is analogous to the right of a seller of property
to the payment of its price. It would be very difficult or impossible to
apportion the consideration of £1,000,000 paid by Mr Weston for the CD among
the rights which go to make up his beneficial ownership of the CD, of which the
right of action against SIB in the events which have happened is one. We
consider that such an apportionment is not called for. The full consideration
must be regarded as consideration given for the CD.
52. As we have decided that the
only relevant ‘asset’ for CGT purposes was the CD and that the CD was a debt in
sterling held by Mr Weston as original creditor as against SIB, and as it was
not argued that the CD was a debt on a security, the appeal must be dismissed
because it falls foul of section 251(1) TCGA.
53. It is therefore not
necessary for us to decide the issue of whether the CD became of negligible
value in the tax year 2008/09.
54. However, in view of the
argument and evidence on that point which we have heard, and in case the appeal
should go further, we will state briefly our conclusions.
55. We agree in broad terms with
the First-tier Tribunal in Barker and others v Revenue and Customs
Commissioners [2011] UKFTT 645 (TC) that for purposes relevant to the
construction of section 24 TCGA there is no – or, at any rate, no significant –
distinction to be made between negligible value and nil value. Their conclusion
as to the construction of the statutory phrase ‘negligible value’ in that
section was as follows (ibid. [48]):
‘The
test of eligibility for a claim under s24(2) is therefore: does this asset have
a market value? If the answer is no, a claim may in principle be made; if the
answer is yes, no claim under this provision if appropriate. The draftsman had
accordingly no need to specify whether the word ‘value’ in the phrase
‘negligible value’ meant ‘market value’ – or some other type of value – because
the reference is to a situation in which there is no objective value. It was
rightly accepted by both parties that ‘negligible value’ meant ‘worth next to
nothing’: and although it is at first sight odd for a claim for ‘negligible’
value to be set at nil, it is quite consistent with an approach which accepts
that nil and negligible are so close as to make no difference’.
56. We point out that the
draftsman of section 24 TCGA clearly considered that a negligible value could
equate to a consideration of a positive amount and so, although we agree that a
negligible value claim can specify a nil value, it need not do so – but a
positive amount ranking as a negligible value would, we agree, be “next to
nothing”.
57. The evidence before us as to
the value of the CD was as follows. The Stanford group, of which SIB was a
part was put into administration on 19 February 2009. The Securities and
Exchange Commission filed its ‘First Amended Complaint’ against SIB and others
on 27 February 2009, alleging the misappropriation of billions of dollars of
investor funds and falsification of SIB’s financial statements. On 13 July
2009, Nigel Hamilton-Smith, Joint Liquidator of SIB had emailed Mr Weston (and
doubtless many other claimants) stating that the liquidators could not at that
stage estimate the quantum and timing of payment of any dividend to investors
but that it was not anticipated that any distribution would be available before
January 2010. Some time between 13 July 2009 and 25 November 2009, Stuart Dick
received what they regarded as an authoritative indication (from whom, is not
clear) that a dividend of 10 pence in the pound would be paid to investors in
SIB. Mr Pink’s opinion was that such announcements as were on public record in
February 2009 (in particular the ‘First Amended Complaint’ referred to above) constituted
a major financial shock by any standards, and that it was not conceivable that
any prudent purchaser would have been willing to lay out good money to acquire
the CD.
58. It is for us to find as a
fact on the basis of the evidence which we have summarised whether the value of
the CD at a time in the tax year 2008/09 was nil (or negligible). We accept Mr
Pink’s opinion and decide that it is more likely than not that after 27
February 2009 the CD’s value was negligible, or nil, and give little weight to the
information provided by Stuart Dick on 25 November 2009 that ‘the latest
indications are a 10 pence in the pound distribution to Depositors’. We find
that it would have been impossible for Mr Weston to realise anything more than
a negligible consideration if he had disposed of the CD in the open market to a
willing purchaser between 27 February and 6 April 2009.
59. Therefore, while accepting
(as was common ground between the parties) that a value of 10% of par would not
be ‘negligible’ for the purposes of section 24 TCGA, we find that the CD had a
negligible value for those purposes in the tax year 2008/09.
60. However, for the reasons
given in paragraph 52 above, the appeal is dismissed. Although we recognise
that Mr Weston has suffered a financial loss in reality by reason of his
investment in the CD becoming of negligible value, we consider that Parliament
has framed the CGT legislation on the basis that no loss on an asset of the
nature of the CD should rank as an allowable loss.
Further
appeal
61. This document contains full
findings of fact and reasons for the decision. Any party dissatisfied with this
decision has a right to apply for permission to appeal against it pursuant to
Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.
The application must be received by this Tribunal not later than 56 days after
this decision is sent to that party. The parties are referred to “Guidance to
accompany a Decision from the First-tier Tribunal (Tax Chamber)” which
accompanies and forms part of this decision notice.
JOHN WALTERS QC
TRIBUNAL JUDGE
RELEASE DATE: 16 December 2013
