- Loans made to a borrower unable to pay are still loan relationships (CJ Wildbird Foods v HMRC)
- What are the practical implications of this case?
- What was the background?
- Appellant advanced funds
- Appellant claimed impairment debits
- HMRC didn’t allow the debits
- What did the tribunal decide?
- Money debt
- Transaction for the lending of money
- Case details
Tax analysis: The First-tier Tax Tribunal (FTT) allowed the taxpayer’s appeal. In doing so, the FTT found that even where amounts are advanced to a company by a shareholder, those loan arrangements are documented in a shareholders' agreement and, at the time each advance was made, the borrower had no funds (and no credible plan for funds to be available in the future) to repay the loan (or pay any interest on it), the arrangements can still constitute a loan relationship such that the lender can benefit from non-trading loan relationship debits in recognition of the impaired debt. The FTT’s decision considers the meaning of a ‘money debt’ and when a debt arises from a ‘lending of money’.
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