Euromoney bank win against HMRC

16 December 2023

Delinian Limited, formerly Euromoney Institutional Investor plc (Euromoney), has recently won at the Court of Appeal, which upheld decisions against HMRC at the First-tier and Upper Tribunals, in connection with a disposal of a business via a share for share exchange.   

There are specific provisions in UK legislation which, in certain circumstances, permit a tax neutral share for share exchange, provided that there are bona fide commercial reasons for the transaction and the avoidance of tax is not one of the main purposes of the arrangements. In the case of Euromoney and its disposal of shares in Capital Data Limited (CDL) in exchange for shares in Diamond Topco Limited (Diamond), HMRC claimed that these provisions should not apply because one of the main purposes of the arrangements was tax avoidance. 


To provide the background, in 2014, Euromoney agreed to sell its shareholding in CDL to a third party, in exchange for ordinary shares in the purchaser plus a smaller cash element. However, by the time the deal was finally concluded, the original cash element of the consideration was agreed to be provided in the form of both redeemable preference shares in the purchaser.  

The late change to the structure was made because Euromoney realised that swapping the cash part of the consideration for an issue of preference shares could enable it to benefit in the future from the substantial shareholding exemption (SSE), such that the capital gain arising on the consideration not provided in ordinary shares in the purchaser would fall out of the charge to tax. Key to this was the fact that the SSE did not apply on the sale of shares in CDL, because Euromoney’s shares did not carry dividend rights, but it would apply when the ordinary or preference shares in Diamond were sold or redeemed, provided this happened at least 12 months after the share exchange. 

The parties’ arguments

HMRC argued that one of the main purposes of restructuring the deal to include a share for share exchange involving preference shares, was to enable Euromoney to avoid tax, and therefore the provisions enabling a tax neutral share for share transaction did not apply. Consequently, it amended the relevant tax return to show a tax liability due from Euromoney of over £10m. 

Euromoney did not dispute that the preference shares were included in the transaction to mitigate the tax that would otherwise be due on the cash consideration, but argued that the avoidance of tax was not one of the main purposes of the arrangements as a whole, which comprised the sale of shares in CDL worth in the region of US$85m (whereas the potential tax saving achieved by utilising the preference share structure would represent less than 5% of this amount).  

The decision and what it means

The Court of Appeal’s decision to dismiss HMRC’s appeal was essentially based upon the fact that the transaction needed to be considered as a whole when looking at the purpose of the arrangements entered into, not its constituent parts, as argued by HMRC. In this case, the exchange included ordinary shares that represented a far greater proportion of the overall value of the transaction than the preference shares, and in the lower tribunals it had been established as a fact that the tax saving from the preference share consideration was not a main purpose of Euromoney in entering into the transaction as a whole.

The decision in favour of the taxpayer in this case provides further clarity regarding the application of the anti-avoidance rule in the share for share exchange legislation. It also serves as a reminder to businesses that UK tax legislation contains several similar relieving provisions which require a taxpayer to establish both that there are bona fide commercial reasons for a transaction and that the avoidance of tax is not one of the main purposes of the arrangements.

For more information, please get in touch with Suze McDonald or your usual RSM contact.