Gary Ives v The Commissioners for HMRC
[2023] UKFTT 968 (TC)
Wayne Bottomer v The Commissioners for HMRC
20 October 2023
[2023] UKFTT 893 (TC)
First-tier Tribunal
A couple sold a house and paid a friend half the profit for help finding and fixing it up. The tax man said they couldn't deduct that payment from their taxes because it wasn't a payment for professional services, it was more like a business partnership. The judge agreed.
Key Facts
- •Appellants paid £31,906.50 (half the profit from a property sale) to a third party who introduced them to the property and assisted with renovations.
- •The third party, SB, was an accountant but also involved in property.
- •Payment was made after the property sale; no written agreement existed initially.
- •Appellants claimed the payment as a deductible cost for capital gains tax purposes.
- •HMRC disallowed the deduction.
- •The second Appellant's claim to offset trading losses was withdrawn.
Legal Principles
Deductibility of costs in computing capital gains is restricted by s. 38 TCGA 1992.
s. 38 TCGA 1992
Section 38 TCGA 1992 is cautiously restrictive, not all expenditure is deductible.
Blackwell v HMRC [2017] EWCA Civ 232
Outcomes
Appeal dismissed; deduction disallowed.
The payment did not meet the criteria of s. 38 TCGA 1992 for allowable deductions. It was not wholly and exclusively for acquisition or disposal, and SB's services didn't qualify as professional services under s.38(2). The arrangement was deemed a profit-sharing agreement, not payment for professional services.
Second Appellant's appeal (offsetting trading losses) dismissed by consent.
Trading losses were from a prior year and not available to offset the current year's gain.