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Mansworth v Jelley - a change of heart…

Once upon a time a long time ago , well 2003, anyway, there was a rather odd tax case on share options which led to the situation in which, on the exercise of share options, subject to income tax, followed by a sale of those shares, there was an effective double counting of the base cost. This meant that the fortunate taxpayers realised capital losses on the sale for tax purposes (although not suffering a commercial loss). The sums involved were often large and although questions were asked at the time, HMRC was insistent that this was the correct treatment.

Unexpectedly, HMRC has now received legal advice that its previous guidance was wrong and issued new guidance on this subject. This can be checked at The first statement was so unhelpful that a further Q&A was issued at

To summarise the position, there are two limbs to this new guidance. Firstly, any future transactions of this type will not realise a capital loss, but that is perhaps less important than the second limb which affects losses previously claimed but not yet used. There are many of these losses around as some of the sums involved were very substantial and there is now a serious question mark over whether they can be used in the furture.  HMRC are firmly of the view that the answer is no.

The key point is that anyone who thinks they have such losses brought forward from earlier years should review their position to ensure that they do not end up with unexpected tax bills should they realise a gain in the future.  

Comment on this blog in the space provided below. Lisa Spearman is a Tax partner at Mercer & Hole. 



Date: 25th September, 2009
Author: Lisa Spearman


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