Directors’ windfall from cancelled shares was caught by transactions in securities legislation

The First-tax Tier Tribunal (FTT) has rejected three business owners’ claims that GBP10 million they received from cancelled shares in their company was exempted from tax under the transactions in securities legislation. The FTT accepted HMRC’s contention that the legislation contained an error and the words ‘despite the fact’ meant ‘where’, not ‘even where’. This limited the exclusion of returns of share capital to cases where the share capital is lawfully distributable as dividends. The decision (Hunt v HMRC, 2025 UKFTT 538TC) had to await a ruling that dealt with related issues on relevant consideration (Osmond and Allen v HMRC).

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