9911796707
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Issues Involved:
1. Valuation for capital gains tax. 2. Special circumstances affecting Stock Exchange prices. 3. Relevance of unpublished negotiations in market value assessment. Detailed Analysis: 1. Valuation for Capital Gains Tax: The primary issue revolves around the valuation for capital gains tax on April 6, 1965, of 98,604 ordinary stock units in R. W. Crabtree & Sons Ltd owned by the taxpayer. The method of valuation is set out in section 44 of the Finance Act, 1965. Subsection (1) defines "market value" as the price which assets might reasonably be expected to fetch on a sale in the open market. For securities quoted on the London Stock Exchange, subsection (3) provides a measuring rod, stating that the price should reflect quotations in the London Stock Exchange Official Daily List unless special circumstances indicate otherwise. 2. Special Circumstances Affecting Stock Exchange Prices: The taxpayer argued that special circumstances existed on April 6, 1965, which affected the Stock Exchange prices. These circumstances included the fact that the board of R. W. Crabtree & Sons Ltd had not made public the discussions with Vickers regarding a possible cash take-over bid, which had been halted in February 1965. Evidence suggested that had this information been public, the Stock Exchange price would have been higher. The Special Commissioners agreed, finding that the Stock Exchange was "working in blinkers" and was "shut off from information vital to a realistic assessment of the true value of the stock." 3. Relevance of Unpublished Negotiations in Market Value Assessment: The court examined whether the failure to announce the negotiations constituted a special circumstance under subsection (3). The Crown argued that the non-publication was not a special circumstance. The court noted that many factors contribute to Stock Exchange quotations, and it would be disruptive to analyze these factors for valuation purposes. The court found insufficient evidence to justify the conclusion that there were special circumstances allowing the taxpayer to escape the measuring rod of subsection (3). Judgment Analysis by Each Judge: Russell L. J.: Russell L. J. emphasized that the evidence did not support the existence of special circumstances that would invalidate the Stock Exchange prices as a proper measure of market value. He stressed that the open market should not be assumed to know of negotiations that were not public. He concluded that it was unrealistic to suppose that purchasers in the open market would be aware of the negotiations, thus allowing the appeal. Sachs L. J.: Sachs L. J. highlighted the legislative intent behind section 44(3) of the Finance Act, 1965, which aimed to provide a simple basis for calculating capital gains tax. He pointed out that the onus of proving special circumstances lies with the party alleging their existence. He found no evidence that an announcement of the negotiations would have been normal or expected by April 6, 1965. He agreed that the matters found did not constitute special circumstances and supported allowing the appeal. Buckley L. J.: Buckley L. J. concurred with the other judges, emphasizing the need to carefully examine the evidence before the Special Commissioners. He noted that the evidence did not establish an entitlement for prospective purchasers on the Stock Exchange to be informed about the negotiations. He agreed with the reasoning of Russell L. J. and supported allowing the appeal. Conclusion: The appeal was allowed with costs in the Court of Appeal and below. The court found that the non-publication of the negotiations did not constitute special circumstances under subsection (3) of section 44 of the Finance Act, 1965. The taxpayer was granted leave to appeal by the House of Lords. Final Order: Appeal allowed with costs in the Court of Appeal and below. Leave to appeal refused by the Court of Appeal but granted by the House of Lords.
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