Meaning of "security" for tax purposes and marketability

The decision in The Nigel Blackwell Family Trust v HMRC [2026] UKFTT 1361 concerns the use of expert evidence in the FTT. However, the underlying question, whether a particular loan agreement was a “security” for tax purposes and the approach of the FTT to the question whether expert evidence should be allowed to assist in the determination of that question is revealing.

The underlying appeal concerns whether a Loan and Security Agreement (LSA) constituted a “security” for the purposes of ITA 2007 s.247, which provides for the continuity of EIS relief where the issuing company is acquired by new company, and also the continuance of EIS deferral relief under TCGA 1992 Schedule 5B para 8, provided that the consideration for the old shares are new shares in the acquiring company. For these purposes, shares include securities.

The taxpayer sought permission to adduce expert evidence on the question of whether the LSA was “marketable” and, in particular, whether there were realistic third-party purchasers, whether there was a market for loans of that nature and the extent to which the LSA possessed the characteristics of a marketable investment.

In rejecting the argument that expert evidence was necessary in this case, the FTT has discussed the nature of a “security” for these purposes. The FTT noted that in Ramsay [1982] AC 300, the House of Lords distinguished between simple debts and debts having investment characteristics, including features which rendered them marketable and capable of being dealt in as investments. Therefore, it was clear that “marketability” may be relevant to the analysis. The FTT also accepted that the decision in Taylor Clark International Ltd [1998] STC 1259 supports the proposition that the Tribunal should not consider the contractual terms of the debt in isolation, making clear that the commercial context is relevant and that marketability may form part of the overall assessment. However, the case law did not hold that the existence of actual purchasers or an actual secondary market was a necessary element of the statutory test. The cases established that the principal inquiry is into the characteristics of the debt viewed in its commercial context and these are matters that the FTT is capable of determining without the use of expert evidence.

The FTT also went further and held that even though expert evidence might provide some assistance, it should nevertheless be refused as it was still not reasonably required to determine the proceedings. The legal question was whether the LSA was a “security”. That question was to be determined by considering the terms of the LSA, the surrounding circumstances and factual evidence available. The taxpayer’s approach risked elevating one evidential consideration (“marketability”) into a separate issue requiring expert determination, when the question was simply whether the LSA possessed the characteristics which, viewed objectively and in its commercial context, gave it the character of a security.