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Payment to taxpayer for transfer of beneficial interest in distribution rights was a taxable disposal

By Mark McLaughlin, July 2024

The First-tier Tribunal erred in concluding that the taxpayer’s transfer of the beneficial interest in distribution rights in company (where the company’s articles did not provide for transfer of those rights) was a disposal. 

The appellant was a director of a company (MAH), which was limited both by share capital and guarantee rights. MAH’s articles of association provided for both shareholder members and investor members. Only shareholders were required to pay or contribute to the capital of the company; investor members were instead required to pay for ‘distribution rights’ costing £100 each. In June 2009, the appellant became an investor member as he acquired four ‘distribution rights’ for £100 each. 

Shares in MAH had no voting rights (other than on matters affecting the shares), limited rights to income and the right to a repayment of capital on a winding-up or reduction of capital.

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