Trigg v HM Revenue & Customs

The QCB exemption under section 117 of the Taxation of Chargeable Gains Act 1992 depends on the statutory language. Sterling means sterling itself, not any currency that may later replace it. Section 117(2)(b) is a limited exception for redemption in another currency at the prevailing exchange rate; it does not extend to conversion. Currency-redenomination clauses triggered only after a completed change in the United Kingdom’s lawful currency do not prevent bonds from qualifying where the substantive currency change has already occurred. Purposive construction principles developed in tax-avoidance cases do not justify giving section 117 a special meaning in an ordinary commercial case.

Mr Nicholas Trigg appealed from the Upper Tribunal (Tax and Chancery Chamber), which had allowed HMRC’s appeal from the First-tier Tribunal. The First-tier Tribunal had held that he was entitled to the capital gains tax exemption for qualifying corporate bonds under section 115 of the Taxation of Chargeable Gains Act 1992. The bonds were sterling-denominated securities containing provisions for redenomination if the United Kingdom adopted the euro or another currency.

The appeal concerned whether those provisions were provisions for conversion into a currency other than sterling under section 117(1)(b), and whether section 117(2)(b) affected that analysis. Mr Trigg’s case was the lead case for nine joint references.

1. Disposition. Lord Justice Patten delivered the judgment. Lord Justice Floyd and Lord Justice Hamblen agreed. The appeal was allowed, and the bonds were qualifying corporate bonds notwithstanding the Schedule A and Schedule B currency provisions.
2. The definition of a qualifying corporate bond in section 117 of the Taxation of Chargeable Gains Act 1992 is a statutory construct identified by the words used. The court rejected an extended meaning of sterling. Sterling means the pound sterling, not whatever currency might later become the United Kingdom’s lawful currency. The euro is therefore a currency other than sterling even if it replaces sterling.
3. Section 117(2)(b) operates as a limited disregard for redemption in another currency where the prevailing exchange rate is used. It does not extend to conversion. The difference between section 117(1)(b) and section 117(2)(b) was deliberate and confirmed that the primary provisions should bear their ordinary meaning.
4. The court treated UBS AG v HMRC [2016] UKSC 13 and the related tax-avoidance authorities as context-specific illustrations of purposive construction. The approach in Barclays Mercantile Business Finance Ltd v Mawson [2005] 1 AC 684 requires the court to construe the legislation and ask whether the transaction answers the statutory description. In an ordinary commercial context, that approach does not justify giving section 117 a special or qualified meaning.
5. The contractual provisions were triggered only by a completed change in the United Kingdom’s currency. The substantive currency change would therefore precede any contractual redenomination, and the provisions would not convert the bonds into a currency other than sterling for section 117(1)(b) purposes. If the relevant legislative machinery was considered, the court was confined to the EU regulations then in force and could not substitute a speculative alternative regime.

• Court of Appeal (Civil Division): Allowed the appeal and held that the bonds qualified for the exemption.
• Upper Tribunal (Tax and Chancery Chamber): Allowed HMRC’s appeal from the First-tier Tribunal: [2016] UKUT 0165 (TCC).
• First-tier Tribunal: Held that Mr Trigg was entitled to the exemption under section 115 of the Taxation of Chargeable Gains Act 1992.