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Stephen Marks claimed that in 1982 the company was worth £8.4m, but tax tribunal rules it was worth just £4.1m
French Connection founder Stephen Marks has a suffered a tax blow that could cost him hundreds of thousands of pounds in capital gains tax.
A tax tribunal has ruled that the company was worth less in 1982, the base year for capital gains tax calculations for assets owned before then, than Marks had argued.
He suggested the two companies that then made up the group, French Connection Overseas and Stephen Marks Holdings, were together worth £8.4m, whereas HM Revenue & Customs contended that they were worth just £3.1m. The court decided they were in fact worth £4.1m.
A higher value would have meant Marks would have a smaller capital gain not just for the tax years he has disputed, but also for all future disposals.
His dispute over the valuation came after he sold £50m of shares from 2000 to 2004. The last of those sales, of 9m shares netting him £36m, helped him finance his divorce. Taking into account those sales and possible future sales, the extra CGT he will have to pay could be as much as half a million pounds. If Marks disposed of his remaining 41% stake in the company today, the difference in his and the court's valuation would cost him £400,000-£500,000 in extra tax, depending on his use of available reliefs, accountants said.
Since the last sale in 2004 the value of the company has fallen considerably. It was worth £4 a share, or about £400m, in 2004 when Marks made his biggest sale, but has dropped to about £1 a share, closing at 103.5p on Friday. That values Marks's stake at around £40m today.
The company enjoyed success in the early 2000s with its risqué "FCUK" T-shirts, before customers tired of the joke. It completed a strategic review last year, selling the Nicole Farhi brand and heading back into the black. Marks founded the company in 1972.
He declined to comment.
