O'Sullivan v HM Inspector of Taxes

For taper relief under section 2A of the Taxation of Chargeable Gains Act 1992, the qualifying holding period is generally the period after 5 April 1998 for which the asset was held at disposal. Where section 2A(9) applies, one additional year is added. The wording does not permit the whole period of ownership before 5 April 1998 to be counted. The legislation also avoids overlapping indexation allowance and taper relief for the same period.

The taxpayer sold a share in a close company on 21 May 1999. She had acquired it in April 1989 and claimed that the gain qualified for a 75 per cent taper relief reduction, based on a holding period of at least ten years.

The Special Commissioner held that the relevant period was two years: the period after 5 April 1998, plus the additional year required by section 2A(8)(b). The taxpayer appealed, arguing that the phrase “had been held” included the whole period since acquisition.

1. The appeal was dismissed. The Special Commissioner’s decision was plainly right.
2. Under section 2A(8) of the Taxation of Chargeable Gains Act 1992, the qualifying holding period is the period after 5 April 1998 for which the asset had been held at the time of disposal. In the case falling within section 2A(9), one year is added.
3. The phrase “had been held” did not include the whole period from acquisition. The use of the past perfect was grammatically necessary because the asset had already been disposed of; “has been held” would be incorrect.
4. Only whole years count under section 2A(5). The asset had been held for just over one year after 5 April 1998, so the qualifying period was two years after adding the statutory bonus year. The applicable chargeable percentage was therefore 85 per cent, representing a 15 per cent taper relief reduction.
5. The wider statutory scheme supported that construction. Indexation allowance for periods after April 1998 was available only for corporation tax under section 53(1A), and it would be anomalous for both indexation allowance and taper relief to apply to the same period.

• High Court (Chancery Division): the appeal from the Special Commissioner was dismissed and the decision dated 27 September 2004 was affirmed.