Marren v Ingles
A right to receive unascertainable deferred consideration on a sale of shares is a separate asset, so that the later receipt of money under it is a disposal of that right for capital gains tax.
Facts
The taxpayers sold their shares in a company, in return for an immediate cash payment and a right to a further payment, to be calculated by reference to the price at which the shares were later sold on the stock market, if the company was floated. The amount of the further payment was uncertain at the time of the sale. When the company was floated, the taxpayers received a substantial further sum. The question was how the right to the further payment and its later satisfaction should be treated for capital gains tax.
Legal principle
The House of Lords held that the right to the further payment was an asset, being a chose in action, and that its value at the time of the sale formed part of the consideration for the disposal of the shares. When the further sum was later received, there was a disposal of the chose in action, under the provision which treats the receipt of a capital sum derived from an asset as a disposal of that asset. The right was not a debt, because the amount was unascertainable, so the exemption for the disposal of a debt by the original creditor did not apply. The taxpayers were therefore liable to tax on the difference between the value of the right at the time of the sale and the sum later received. Such rights are known as Marren v Ingles rights.
Related cases on capital gains, inheritance tax and property taxes
- Goodwin v Curtis [1998] STC 475
- Ingram v Inland Revenue Commissioners [2000] 1 AC 293
- Pitt v Holt [2013] UKSC 26, [2013] 2 AC 108
- Revenue and Customs Commissioners v Lockyer [2013] UKUT 50 (TCC)
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