Two entrepreneurs have lost their appeal about the amount of capital gains tax due on the sale of their care home business.

Michelle McEnroe and Miranda Newman appealed to the Upper Tribunal after the First-tier Tax Tribunal (FTT) threw out their earlier appeal against HMRC’s assessment of capital gains tax (CGT). The FTT had rejected Ms McEnroe and Ms Newman’s argument they should be assessed on the £6.9 million sale of shares instead of the full £8 million sale price as £1.1 million was bank debt.

The Upper Tribunal has backed the FTT’s decision.

Background to the McEnroe & Newman v HMRC tax appeal

Ms McEnroe and Ms Newman were the sole shareholders in Kingly Care Partnership Limited, holding one ordinary share each.

In October 2013 they agreed to sell the shares to Active Assistance Finance Limited for £8 million in a sale and purchase agreement (SPA).

Kingly owed its bank £1.1 million, which the buyer’s solicitors paid to the bank on completion of the sale.

Ms McEnroe and Ms Newman declared their capital gain to HMRC as the £6.9 million they received directly from the buyer (plus the working capital adjustment and the earn out received later).

HMRC opened an enquiry into their tax returns and went on to issue closure notices stating the consideration should be £8 million, plus the earn out.

Ms McEnroe and Ms Newman appealed to the FTT against the closure notices. The only point in dispute was whether the consideration for the shares was £8 million, or £8 million minus the bank loan.

The findings of the First-tier Tax Tribunal

In its decision released in March 2022, the FTT dismissed the appeal because Ms McEnroe and Ms Newman hadn’t proved the closure notice was incorrect.

The appellants then appealed the FTT’s ruling to the Upper Tribunal.

The Upper Tribunal’s decision

The Upper Tribunal rejected the argument that the FTT had made a mistake in law by failing to consider the application of clause 3.3 when interpreting the terms of the sale agreement.

It said: “It is clear on the face of the FTT’s decision at paragraph [28] that the tribunal was aware of the provisions of clause 3.3 and the potential for there to be a working capital adjustment. Other findings made by the FTT are consistent with it having considered the provisions of the SPA relating to the working capital adjustment. As neither party argued that clause 3.3 did or should adjust the consideration, we find that it was reasonable for the FTT not to have given further consideration to this point.”

The Upper Tribunal backed the FTT’s finding that Ms McEnroe and Ms Newman “had not discharged their burden of proof to displace HMRC’s closure notice”.

The appeal was dismissed, which means the entrepreneurs are likely to face a bill for extra capital gains tax.

Our reaction to the sale of shares tax appeal

Selling shares in a business can be stressful and costly in terms of professional fees. Both the buyer and the seller usually know how they want the sale to be arranged and don’t understand the need for specialist advice.

But professional advice is essential to make sure the agreement is properly documented and, most importantly, that the paperwork supports the taxpayer’s filing position should HMRC review the records.

If HMRC opens an enquiry, the tax body will inevitably ask for a copy of the sale and purchase agreement and any other documents involved.

So, making sure the records fully support the taxpayer’s intended position is money well spent.

Need help with your taxes?

Our experienced tax consultants can advise you on a range of tax matters, including CGT and sales of shares.

Call us today on 07813 434195 or email

Steph Churchill

Stephanie Churchill

Managing director & co-owner of Churchill Taxation