Abigail Tan v The Commissioners for HMRC
[2024] UKFTT 238 (TC)
Timothy Bunting v The Commissioners for HMRC
27 March 2024
[2024] UKFTT 275 (TC)
First-tier Tribunal
A businessman lent money to his company, which went bankrupt. He swapped the debt for worthless shares. The tax office said he couldn't claim tax relief on the lost money because the debt was 'gone'. The court disagreed, saying he was still owed the money, even if he couldn't legally force the company to repay it. He got his tax relief.
Key Facts
- •Mr. Timothy Bunting (Appellant) appealed HMRC's refusal of a loss relief claim under s253 TCGA 1992 following a loan capitalisation.
- •Bunting lent £3,452,771 to his company, Rectory Sports Limited, for its business.
- •£2,200,000 of the loan was capitalised by issuing shares with no value.
- •Bunting claimed capital loss relief under s253 TCGA 1992, which HMRC refused.
- •The appeal focused on whether a claim can be made under s253(3) when the loan no longer subsists due to satisfaction (capitalisation).
Legal Principles
Interpretation of s253(3) TCGA 1992, particularly the phrase 'makes a claim and at that time...any outstanding amount of the principal of the loan has become irrecoverable'.
Taxation of Capital Gains Act 1992, s253(3)
Purposive interpretation of statutes, considering the legislative intent and context.
Hurstwood Properties Ltd v Rossendale Borough Council [2021] UKSC 16
The meaning of 'outstanding' in s253(3) is 'not paid', not necessarily 'enforceable'.
Crosby v Broadhurst [2004] SpC 416
Effect of the 1996 amendment to s253, which codified extra-statutory concession D36. The presumption that a codifying Act doesn't change the law unless the wording requires a different interpretation.
Finance Act 1996, s201 and Schedule 39, para 8; Maunsell v Olins [1975] AC 373
Treatment of debt satisfaction under s251 TCGA 1992: satisfaction is a disposal, but not necessarily a payment for capital gains tax purposes unless consideration is received.
Taxation of Capital Gains Act 1992, s251
Outcomes
Appeal allowed.
The Tribunal found that the capitalisation agreement did not represent payment because the shares were worthless. The unpaid debt remained 'outstanding' and 'irrecoverable' at the time of the claim, meeting the conditions of s253(3), even though the loan no longer existed due to satisfaction for no consideration.