In Simon Widers v HMRC [2026] TC09836, the First Tier Tribunal (FTT) found that claimed share loss relief arising from an investment in a marine salvage venture was not allowable because the expenditure was not incurred wholly and exclusively for the acquisition of the shares, and in any event, one of the main purposes of the arrangements was to secure a tax advantage.
The case concerned a claim for Share loss relief following the failure of a speculative shipwreck search investment structured with loan finance.
- In January 2011, Mr Wilders subscribed for 115 ordinary shares in Shantaram Search and Verification Limited (SSVL) at £864 per share, for a total subscription price of £99,360.
- Of this amount, £24,840 was paid from Mr Wilders' own funds and £74,520 was funded through a loan from Sterling Credit Guarantee Company Ltd (SCGC).
- SSVL was incorporated to raise capital to participate in a joint venture formed to search for the wreck of the Merchant Royal, a 17th-century merchant vessel believed to have sunk with a valuable cargo.
- Prior to Mr Wilders' investment, an initial search funded by joint venture participants had identified a debris field and artefacts consistent with a vessel of the relevant period, but the wreck itself had not been located.
- The investment was promoted through an Information Memorandum (IM) and a suitability letter, describing the venture as highly speculative but outlining potential substantial returns if the wreck were found.
- The joint venture involved specialist marine contractors, including Odyssey Marine Exploration Inc (OME) and Overseas Historic Ventures Inc (OVH), with contractual arrangements that deferred large portions of their fees contingent on success.
- The loan to the appellant was legally full recourse, secured over the shares, and guaranteed by a connected company, Charlesworth Marine Ltd (CML).
- However, the loan documentation permitted novation at maturity to a third party nominated by the investor for a minimum consideration of £1,000 if the search failed.
- The search commenced in April 2011 and continued into early 2012, but the wreck was not found, and SSVL's funds were exhausted.
- SSVL ceased activities and the shares became worthless. Mr Wilders claimed share loss relief against income for the 2010-11 tax year by way of an amendment to his Self Assessment tax return, which was submitted on 23 March 2012.
- On 16 February 2022, HMRC issued a Closure notice disallowing the claim, arguing that the arrangements were tax-motivated and that the conditions for relief were not met.
- Five issues were in dispute, including whether the shares were acquired at market value, whether the full subscription cost was allowable, whether anti-avoidance provisions applied, and whether SSVL carried on a qualifying trade.
The First Tier Tribunal (FTT) found that:
- The shipwreck search itself was genuine, speculative, and not bound to fail, and SSVL's activities formed part of a real commercial venture.
- SSVL was engaged in a qualifying trade carried on with a view to profit, notwithstanding the high level of risk and uncertainty.
- HMRC's argument that the shares were valueless at acquisition was not valid and the subscription price of £99,360 represented the market price of the composite investment opportunity offered.
- What Mr Wilders acquired was not simply shares, but a composite "package".
- The subscription price was paid for this composite arrangement, not Wholly and exclusively for the acquisition of shares.
- As a result, section 38 of the Taxation of Chargeable Gains Act (TCGA) 1992 was not satisfied, and no allowable loss arose on the deemed disposal of the shares.
- The loan arrangements were, in practice, designed to avoid or indefinitely defer repayment through novation to connected or non-enforcing parties.
- One of Mr Wilders' main purposes in entering into the arrangements was to secure a tax advantage.
- Accordingly, even if a loss had arisen, it would have been disallowed under section 16A TCGA 1992.
- Section 30 TCGA 1992 (value shifting) did not apply, as the reduction in share value resulted from the failure of the search rather than from the arrangements themselves.
Tha appeal was dismissed and HMRC's closure notice was upheld.
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