In Stan Murray-Hession v HMRC [2016] UKFTT 612, the First-tier Tribunal (FTT), held that Mr Murray-Hession (the Appellant) had subscribed for shares within the meaning of section 135(2), Income Tax Act 2007 (ITA), so that share loss relief, under section 131, ITA, was available.


Geezer Telecom Limited (the Company) was a private company limited by shares. It carried on the business of selling phone and broadband services and its sole director was Mr Alan Gray.

On incorporation, the share capital of the Company consisted of 100 ordinary shares of £1 per share paid up, and Mr Gray was the sole subscriber to those shares.

The Appellant became acquainted with Mr Gray and in 2010 it became apparent that the Company required further capital. Although the Appellant was not an experienced investor, he was aware that others in his friendship group were investing in the Company and after some negotiation agreed with Mr Gray, in early 2011, that he would receive a 22.5% stake in the ordinary share capital of the Company in return for an investment of £272,000.

The Appellant received an email from Mr Gray setting out their agreement and confirming that in return for his investment, the Appellant would receive a subscription of 225 shares "which will come from a new issue of ordinary shares". The Appellant claimed that he had received a share certificate; however, he was unable to produce this to HMRC.

On 13 July 2011, Mr Gray (in his capacity as sole director of the Company) resolved to subdivide the share capital of the Company from 100 nominal shares at £1 to 1,000 shares at 10p.

The Company entered administration in 2012, and the Appellant claimed that he was entitled to loss relief in relation to his investment in the Company, as the shares had become worthless.

HMRC accepted that the Appellant had made payments to the Company between June 2011 and May 2012 to the value of £272,000, but rejected his claim that the Company had issued shares to him. HMRC contended that the share capital of the Company had been subdivided into 1,000 10p shares. This allowed Mr Gray, in July 2011, to transfer 225 shares to the Appellant for nil consideration. In May 2012, the Appellant transferred those shares to Mr Gray for nil consideration. As a result, argued HMRC, the Appellant must have lent the money to the Company. Accordingly, as the Appellant had paid nothing for the shares and received nothing for them when he sold them he was not entitled to claim share loss relief when the Company entered administration.

The Appellant appealed against the conclusions set out in HMRC's closure notice and the consequential amendments to his return for the tax year 2011/12.

FTT's decision

The sole question for the FTT's determination was whether the Appellant had subscribed for shares in the Company within the meaning of section 135(2), ITA.

The FTT concluded that the Appellant had indeed entered into an agreement with Mr Gray under which he would invest £272,000 in the business by way of subscription for shares. This explained why the funds had been paid to the Company rather than to Mr Gray's personal account, and why the draft accounts of the Company, which had been prepared by a qualified accountant, showed a share premium account.

Further, a letter dated 12 July 2012, from Mr Gray to the Appellant, read as follows: 

"Dear Shareholder

... the total cash impact into Geezer is £800,000. I remain & continue to be majority shareholder & CEO of the company. .... There will be a dilution of shares as in all expansions like this. You will receive your new share allocation shortly. This won't impact the value of your return & may look like you have more shares because the amount may go up."

The FTT concluded that the share subdivision had therefore taken place to enable the agreed percentage of shares to be issued to the Appellant and Mr Gray had held the relevant shares as nominee for the Appellant pending their registration. As the Appellant had held the beneficial ownership in the shares from the time of the subdivision, there had been no transfer of beneficial ownership between Mr Gray and the Appellant. The Appellant had therefore "subscribed for shares … in consideration of money or money's worth" within the meaning of section 135(2), ITA, and had realised a loss for CGT purposes.

The appeal was therefore allowed.


This decision highlights the importance of ensuring that transactions which may have a fiscal consequence are fully documented. Indeed, this appeal would have been avoided had the Appellant been able to evidence to HMRC's satisfaction that the transactions had taken place.

A copy of the decision can be found here.