Mahadevan Krishnamohan & Anor v The Commissioners for HMRC
Decision date: 25 April 2024
Neutral citation: [2024] UKFTT 346 (TC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
The appeals concerned whether arrangements styled as "Option Agreements" were, on grant, disposals (options) chargeable to CGT or were in substance loans/security. The First-tier Tribunal held that no option was granted on entry of the First Sheen Agreement because the grantor could prevent the grantee ever acquiring a choice to buy (notably by repayment/termination), and therefore the appeals were allowed. The Tribunal did not need to decide whether the transactions were loans or security once it concluded no option existed at the critical time.
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: high
Where an alleged grant of an option is contingent on a future event that the grantor can prevent by taking contractual steps (such as repayment or termination before the option period elapses), there is no immediate grant of an option on entry; the grantor's ability to control whether the grantee ever obtains the choice to exercise is material to whether a disposal has occurred.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The Tribunal observed that option agreements need not be immediately exercisable, but that where exercise depends on a future event courts should consider whether the grantor can control that event; it also noted it was unnecessary to resolve realistic/purposive recharacterisation as loans or conveyance-by-security once no option was found.