Owner-Managed Businesses

Weekly case highlights ― 9 May 2022

Produced by Tolley
  • 16 May 2022 11:03

The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Weekly case highlights ― 9 May 2022
  • Corporation tax
  • Hexagon Properties Limited v HMRC
  • Business tax
  • Robert Don Hunter Dougan v HMRC
  • VAT
  • 50 Five (UK) Limited v HMRC
  • R.T. Rate Limited and others v HMRC
  • Tax administration
  • Wyatt Paul v HMRC
  • More...

Weekly case highlights ― 9 May 2022

These are our brief notes and thoughts on cases published in the last week or so which caught our eye and are likely to be of particular interest to tax practitioners. Full case reports and commentary on most of these cases will be included within our normal reference sources in the coming weeks.

Corporation tax

Hexagon Properties Limited v HMRC

Where a company is released from having to repay a debt the resulting credit to its profit and loss account will usually be taxable under the loan relationship rules. Here the release arose as part of a settlement with a bank relating to the mis-selling of an interest rate hedging profit. In simple terms the company owed the bank c£5m but in settlement of its claim was only obliged to repay c£1.5m. The question was therefore whether the £3.5m difference, which was credited to profit and loss, fell within the loan relationship rules. HMRC said it did, but the tribunal disagreed. The test is whether the credit ‘arose’ from the loan relationship. The evidence here was that it didn’t: it was derived from the company’s claim in damages against the bank. It was therefore not taxable under the loan relationship rules. The question of whether or not the £3.5m was taxable as a capital receipt or was exempt under an extra statutory concession was left for further argument between the parties.

The analysis here at para 37 onwards will be required reading for all those dealing with

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