Pike v HM Revenue and Customs
2014
COURT OF APPEAL (CRIMINAL DIVISION)
United Kingdom
CORAM
- LORD JUSTICE RIMER
- LORD JUSTICE TOMLINSON
- LORD JUSTICE UNDERHILL
Areas of Law
- Tax Law
- Civil Procedure
2014
COURT OF APPEAL (CRIMINAL DIVISION)
United Kingdom
CORAM
AI Generated Summary
Nicholas Pike's appeal to the First-tier Tribunal, Upper Tribunal, and subsequently to the Court of Appeal revolved around the classification of £6 million Loan Stock 2013 issued by his company. The Court of Appeal affirmed the lower tribunals' decisions, ruling that the additional amount payable under the loan stock's terms was interest, not a premium, thus disqualifying it from being considered a 'relevant discounted security' under Schedule 13 of the Finance Act 1996. Consequently, Pike's claim for tax relief on a reported loss of £3,463,563 was denied.
Judgment
Lord Justice Rimer :
This appeal is by Nicholas Pike. Mr Pike appealed to the First-tier Tribunal (Tax Chamber) (Judge Mosedale and Mr R. Thomas, ‘the FTT’) against a closure notice and amendment by the Revenue to his self-assessment tax return for the year ended 5 April 2000. The amendment denied his claim for relief in respect of a loss of £3,463,563 arising for income tax purposes upon the occasion of a transfer by Mr Pike of what he claimed was a ‘relevant discounted security’ within the meaning of Schedule 13 to the Finance Act 1996. By a decision released on 4 May 2011, amended on 12 May, the FTT dismissed Mr Pike’s appeal.
Mr Pike’s appeal against that decision to the Upper Tribunal (Tax and Chancery Chamber) (Norris J and Judge Roger Berner, ‘the UT’) was dismissed by a decision released on 10 May 2013. The appeal to this court is Mr Pike’s appeal against that decision of the UT. It is a second appeal. Mr Pike was represented by Mr Scott Redpath, who also appeared for him in the UT, but not the FTT. The respondents, the Commissioners for Her Majesty’s Revenue and Customs (‘HMRC’), were represented by Mr Michael Gibbon QC, as in both tribunals below.
The facts
These are not in dispute. Mr Pike was employed by Dell Computer Corporation in various senior posts until he resigned in January 2000. On 28 March 2000, he acquired ‘off the shelf’ a company he renamed Aim Internet Investments Limited (‘the company’). The business of the company was intended to be investment in the internet and technology sectors. Mr Pike held 999 of its 1,000 issued shares, and his wife the other share. He became the sole director.
On 31 March 2000, Mr Pike caused the company to issue £6 million nominal of Loan Stock 2013, all of which he took at par. The stock certificate certified that the stock was constituted by an instrument entered into by the company on the same date and that it was issued with the benefit of, and subject to the provisions contained in, that instrument and the conditions endorsed on the certificate.
The certificate recorded that the company ‘shall, subject to the terms of this Loan Stock, pay to the Stockholder on 15 July 2013 (“Repayment Date”) the Redemption Proceeds as defined in Condition 2’. The endorsed conditions followed the terms of the conditions provided for by the loan stock instrument, to which no separate reference is required. Condition 2, ‘Redemption’, is of central importance and its material provisions were as follows: