As a CFO, you know Transactions in Securities (TiS) rules under ITA 2007 can ambush capital restructurings. The recent FTT decision in Oscroft & Ors v HMRC [2026] UKFTT 251 (TC) clarifies subsidiary reserves count as “available assets”, future profits factor in, but pre-2016 assessments face tight time limits. This ruling demands immediate review of group structures—especially legacy deals.
The Scheme: Capital Reduction Gone Wrong?
Whitemeadow Group Holdings (WMGH), a close company, owned Whitemeadow Furniture (WMF) with £4m+ distributable reserves. In 2016, WMGH issued bonus shares from merger reserves, reduced capital, crediting £1.86m to shareholders (Ian Oscroft et al.) as loan accounts—no immediate cash. Funded by WMF loan, later repaid via dividends/set-offs.
Shareholders treated as capital (some Entrepreneurs’ Relief). HMRC issued TiS counteraction notices in 2021, taxing as income. Shareholders appealed: reserves not “available”, assessments out-of-time.
Subsidiary Reserves: Fully Accessible
FTT (Judge Anne Fairpo) ruled WMF reserves were available to WMGH. “Assets available” (s685(4)(a)) includes those controllable via shareholder resolutions/Duomatic principle—no third-party veto.
- Full judgment [PDF]
- Claritax analysis: Control trumps form.
- KPMG TMD: Commercial reality rules.
Pre-2016, this aligns with Project Blue—broad interpretation. Post-2016, explicit anyway. CFOs: Audit subs’ reserves in TiS planning.
Future Profits: Realistic Expectations Matter
WMGH debt repaid post-transaction via WMF dividends from future profits. FTT: Debt discharge mechanism relevant—realistic future profits count if evidenced.
“It is not appropriate to consider debt…without reference to how discharged.”
RPC Legal notes timing scrutiny. CFOs: Document profit forecasts rigorously.
Time Limits: Pre-2016 Trap
Assessments (2021) for 2015/16—outside TMA s34 4-year limit. HMRC claimed s698(5) 6-year freestanding power. FTT rejected: TiS subsidiary to TMA; no new power created. Assessments invalid.
Ross Martin: HMRC “loses” on timing. Post-2016: Unlimited if enquired within 6 years.
CFO Playbook: Five Actions Now
- Group Reserves Audit: Map subs’ distributable reserves. Gov.uk BADR guide.
- TiS Stress Test: Model restructurings including sub assets/future cash.
- Pre-2016 Review: Legacy deals—check enquiry windows.
- Documentation: Minutes, forecasts—Duomatic-proof.
- HMRC Clearance: s701 clearance if >£100k advantage.
Broader Implications
Oscroft signals FTT’s commercial lens on TiS—form yields to substance. Oil/gas, manufacturing CFOs with offshore subs: Heightened NIC/TiS risk post-Bilfinger. Pair with Tax Journal Q1 2026.
Planning a capital event? Contact Tanous for TiS-proof structuring. 30+ years HMRC agent experience.
Mark Hendy
CFO Advisor, Tanous Limited
mark@tanous.co.uk | tanous.co.uk