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Payment was not made under a guarantee of a loan

03 May 2019
Issue: 4694 / Categories: Tax cases , Capital Gains
R Dennis (TC6868)

The taxpayer entered into a joint venture with TAG to develop and manufacture electronic audio and audio-visual equipment. They both made investments into the joint venture vehicle by way of loans and shares. After about seven years the company was wound up. The taxpayer made a rebalancing payment of £3m to TAG under the shareholders’ agreement (clause 10.3). 

In his 2007-08 self-assessment return he claimed a loss of £3m which he considered arose under TCGA 1992  

s 253(4) as a result of the payment he had made to TAG. In his 2008-09 return he claimed to offset that loss against other gains that he had made in that year. HMRC refused the claims. The taxpayer appealed.

The issue for the First-tier Tribunal was whether the rebalancing payment amounted to a guarantee of a loan or whether it was an indemnity. The judge said clause 10.3 could apply only after the company had...

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