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Loan to company was not approved charitable investment

05 October 2020
Issue: 4763 / Categories: Tax cases
Reb Moishe Foundation (TC7785)

A company made several donations to the taxpayer a charitable trust over two years. It offered the charity more cash but the charity did not have an immediate use for it. The company director suggested that the taxpayer should still accept the donation and then loan the funds back to the company at an annual interest rate of 24%. The rate was finally agreed at 10%.

HMRC said the arrangement could not be treated as an approved charitable investment or loan. The taxpayer appealed.

The First-tier Tribunal noted that the company and charity were closely linked - one of the trustees was the company secretary and the company director occasionally also stood in for the trustee.

The tribunal agreed with HMRC that the loan was non-charitable expenditure. The trustees took no independent advice as to the suitability of the loan for an investment by a charity nor had they...

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