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Spritebeam Ltd, Prowting Ltd & CRC v CRC & Versteegh Ltd, Upper Tribunal
A group of companies took part in a tax avoidance scheme.
One firm lent money to another under terms that no interest was payable while the loan was outstanding but irredeemable preference shares equal in value to a commercial rate of interest on the loan were to be issued to a third company.
The money lender and share recipient maintained that neither was liable for tax on the interest or its equivalent.
HMRC disagreed and the businesses appealed.
The First-tier Tribunal found the shares were taxable income of the recipient business under TA 1988 s 18 but the lender was not taxable on the value of the shares (TA 1988 s 786(5)).
Both the share recipient and the Revenue appealed.
The Upper Tribunal held that TA 1988 s 786(1) was worded to catch an arrangement for the lending of money regardless...
