Judgment summary
This was a case management decision in an appeal concerning the capital gains tax treatment of the Appellant's disposal of a 50% shareholding in Ulysses Healthcare Limited on 28 November 2018 for £3,300,000 (paragraph 7). The disposal was between connected persons, so the deemed market value consideration provisions applied, and the dispute concerned the correct market valuation of the shareholding.
The hearing dealt with several applications, including the consequences of an unless order, the Appellant's applications to rely on factual and expert evidence, HMRC's application to amend its Statement of Case, and HMRC's application to rely on expert valuation evidence (paragraph 1). By the date of the hearing there was no substantive opposition to the Appellant's evidence applications, and HMRC did not pursue consequences of the unless order (paragraph 2).
The principal issues were whether HMRC should be permitted to amend its Statement of Case and whether HMRC should be permitted to rely on expert valuation evidence (paragraph 3). The Tribunal, applying the principles in Quah Su-Ling v Goldman Sachs International, refused HMRC's amendment application (paragraph 96). Following the hearing, HMRC confirmed it would not seek to instruct an expert witness if the amendment were refused, and the Tribunal therefore dismissed HMRC's expert evidence application as no longer pursued (paragraphs 98 to 101).
Background
The dispute concerned the Appellant's disposal of 50% of his shareholding in Ulysses Healthcare Limited on 28 November 2018 for £3,300,000, a transaction between connected persons deemed to be at market value for capital gains tax purposes (paragraph 7). In support of the returned valuation, the Appellant relied on three Cushman & Wakefield valuations of a trade related property, including a Special Assumption Valuation of £9,450,000, which was used to derive the £3,300,000 share value (paragraphs 8 to 9).
HMRC opened an enquiry under s 9A TMA 1970 on 6 June 2018 (paragraph 10). The Appellant later disposed of the remaining 50% shareholding on 27 September 2019 for £4,262,500, and HMRC accepted that valuation on 21 February 2023 without amendment (paragraph 11). On 7 May 2024, HMRC issued a closure notice under s 28A TMA 1970 amending the 2016-2017 return, valuing the 50% shareholding at £1,050,000, treating the balance of £2,250,000 as a distribution, and charging £631,818.09 (paragraph 12).
The Appellant appealed to the Tribunal on 29 November 2024 (paragraph 13), and HMRC filed its Statement of Case on 18 March 2025 (paragraph 14). On 16 January 2026, the Appellant applied to admit factual and expert evidence out of time, including an expert report dated 24 December 2025 using a discounted cash flow method, valuing a 100% shareholding in Ulysses at £7,000,000 (paragraph 15). HMRC applied to rely on expert evidence on 20 February 2026 (paragraph 16), and the Tribunal listed a hearing for 8 September 2026 (paragraph 17). HMRC applied to amend its Statement of Case on 7 August 2026 (paragraph 18).
Core dispute
The core procedural dispute was whether HMRC should be granted permission to amend its Statement of Case to advance a materially different valuation case in response to the Appellant's expert report, and whether HMRC should be permitted to rely on expert valuation evidence (paragraph 3). HMRC argued the Appellant's expert report, adopting a discounted cash flow methodology, altered the apparent scope of the dispute for the first time, since the enquiry had proceeded on the basis of competing trade related property valuations (paragraphs 20 to 22).
The Appellant argued that his Grounds of Appeal had always challenged HMRC's valuation of the business, not merely the choice between competing trade related property valuations, and that it was for an appropriately qualified expert to determine the correct methodology once the valuation of the business was in issue (paragraph 23).
Underlying the procedural dispute was the substantive question of whether the Appellant's 50% shareholding should be valued using the £4,950,000 TRP Market Value (giving a share value of £1,050,000) or the Special Assumption value of £9,450,000 (giving a share value of £3,300,000), and, if the lower value applied, whether the excess consideration of £2,250,000 was taxable as a distribution (paragraphs 44 to 45).
Court findings
The Tribunal reviewed the enquiry correspondence, the Notice of Appeal, HMRC's Statement of Case, and the litigation correspondence in detail (paragraphs 19 to 66). It found that, although HMRC had a reasonable basis for understanding the dispute as concerning competing trade related property valuations, the Appellant had repeatedly and consistently contended, from as early as 19 February 2020, that HMRC's approach undervalued the business because it failed to reflect goodwill and other intangible assets, and that this went beyond selection between the competing valuations (paragraphs 25 to 42).
The Tribunal found that HMRC's own Statement of Case, filed 18 March 2025, expressly recognised that the Appellant's case required consideration of intangible assets and a premium valuation (paragraph 47), yet HMRC continued to frame the dispute as being confined to the competing TRP valuations (paragraph 48). The Tribunal further found that, by September and October 2025, HMRC were aware the Appellant intended to rely on expert valuation evidence because he maintained HMRC had valued a property rather than a business (paragraph 65).
Applying the principles in Quah Su-Ling v Goldman Sachs International [2015] EWHC 759 (Comm), the Tribunal found that the proposed amendments represented a substantial reformulation of the issues, not mere elaboration, and that although the amended case had a realistic prospect of success, the delay in seeking it was extremely late and inadequately explained by evidence (paragraphs 78 to 88). The Tribunal found that prejudice to HMRC from refusal was reduced because it arose from HMRC's own conduct in failing to plead a response to concerns it had long been aware of, whereas permitting the amendment would require the Appellant to revisit matters already settled by the pleadings and would disrupt efficient and proportionate conduct of the appeal (paragraphs 89 to 94).
Outcome
The Tribunal refused HMRC's application to amend its Statement of Case (paragraph 96). Following the hearing, HMRC confirmed on 15 September 2026 that, if the amendment were refused, it would not seek to instruct an expert witness on the basis of its existing pleadings (paragraph 98). The Tribunal accordingly dismissed HMRC's application for permission to adduce expert evidence as no longer pursued (paragraphs 100 to 101).
The Appellant was granted permission to rely on his factual and expert evidence, and no further order was made in relation to the unless order (paragraph 2). The decision records full findings of fact and reasons, with the parties notified of the right to apply for permission to appeal under Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 within 56 days (paragraph 102).
Major issues / areas of contention
- Whether HMRC should be granted permission to amend its Statement of Case at a late stage of proceedings
- Whether HMRC should be granted permission to rely on expert valuation evidence
- Application of the Quah v Goldman Sachs International principles to a late amendment application in a tax appeal
- Whether the Appellant's expert report introduced a genuinely new issue or merely a new methodology addressing concerns already raised
- The correct market valuation of a 50% shareholding in Ulysses Healthcare Limited for capital gains tax purposes, as between a trade related property valuation and a Special Assumption Valuation
- Whether excess consideration should be taxable as a distribution if the lower valuation applied