In Litman & Newall v HMRC (TC03229 – 16 January 2014) the taxpayers had participated in a capital redemption policy scheme in order to mitigate substantial capital gains realised on the disposal of a business.
HMRC considered that the taxpayers had filed their returns negligently. This was on the basis that the scheme required a loan to have been advanced and it was very clear that no such advance had taken place. HMRC contended that the taxpayers should have established that the scheme was not a sham from a commercial perspective in order to fulfil ‘the reasonable taxpayer test’.
The taxpayers argued that it had been reasonable for them to rely on their professional advisers for all aspects of the transactions including the commercial aspects.
The tribunal agreeing with HMRC found that it was not reasonable for a ‘relatively sophisticated investor’ to rely on this...
