Wednesday Law Report: Liability to Capital Gains Tax on Disposal of Asset ; 19 May 2004 Jerome V Kelly (Inspector of Taxes) ( UKHL 25) House of Lords (Lord Nicholls of Birkenhead, Lord Hoffmann, Lord Scott of Foscote, Lord Walker of Gestingthorpe and Lord Brown of Eaton-Under- Heywood) 13 May 2004
Kate O'Hanlon, Barrister, The Independent (London, England)
SECTION 27(1) of the Capital Gains Tax Act 1979 was concerned only with fixing the time of the disposal of an asset by a person whose identity was to be ascertained by other means.
The House of Lords allowed the appeal of Michael Jerome against a decision that an assessment to capital gains tax for the year 1987- 88 was correct.
On 16 April 1987 trustees holding land for various beneficiaries in undivided shares entered into a contract to sell it to a purchaser. In 1989 the taxpayer and his wife, who were absolutely entitled to interests in the land, assigned part of their beneficial interests, subject to the contract, to the trustees of two Bermuda settlements. By three conveyances in 1990- 1992, the original trustees completed the contracts of sale.
The Revenue assessed the taxpayer to capital gains tax for 1987- 88 on the footing that the effect of section 27(1) of the Capital Gains Tax Act 1979 was that he and his wife had, on 16 April 1987, disposed of the whole of the beneficial interests in the land which they had had immediately before that date, despite the assignments which they had made between contract and completion. Section 27 of the 1979 Act provided:
(1) Where an asset is disposed of and acquired under a contract the time at which the disposal and
acquisition is made is the time the contract is made (and not, if different, the time at which the asset is conveyed or transferred) . . .
The taxpayer appealed to the Special Commissioner, who found in favour of the Revenue, on the basis that section 27(1) provided that 16 April was the date which identified the disposal, including the parties to it and their interests in the property which was the subject of it. …