INTM435040 - Transfer pricing: tax cases - Ridge Securities Ltd v CIR (44TC373)

In a dividend-stripping operation, a share-dealing company purchased War Loan from an associated company for £10,000 and sold it shortly afterwards in the open market for £104,918. The purchase of the War Loan was the issue considered in the case of Petrotim Securities Ltd v Ayres (see INTM435030).

The purchasing company claimed that as the result of this transaction it had made a profit out of which it could declare a dividend. The Special Commissioners rejected this contention and the Chancery Division dismissed the company’s appeal. Applying Petrotim Securities Ltd v Ayres and the principle laid down in Sharkey v Wernher (see INTM435020), it was held that the acquisition value of the War Loan brought into the computation should be its market value (with the consequence that there was no profit).