Mr R J Taylor Mr N Haimendorf v Commissioners for Her Majesty's Revenue and Customs
Decision date: 11 March 2010
Neutral citation: [2010] UKFTT 115 (TC)
Overall AI summary confidence: high
Short overview
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AI confidence in this short overview: high
This case concerns whether section 291B(1)(b) ICTA 1988 requires aggregating loan capital and issued share capital together for the 30% test or applying the 30% thresholds separately to each; the First-tier Tribunal preferred the applicants' construction that the two concepts are not to be mixed into a single apportionable unit and allowed the appeals. The Tribunal also held, for argument, that "loan capital" means debts actually incurred at the relevant date (so unadvanced but merely committed amounts do not count) and that a simple nominal measure of "issued share capital" is a workable basis for the provision. The appeals by Mr Taylor and Mr Haimendorf succeeded; HMRC may seek permission to appeal.
Ratio decidendi
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The statute should be construed to produce a clear, practicable rule rather than an uncertain hybrid that mixes legally distinct concepts; accordingly s.291B(1)(b) is not read as aggregating loan capital and issued share capital into a single apportionable unit, and "loan capital" for s.291B(7) means debts actually incurred at the relevant date, excluding mere unadvanced commitments.
Obiter dicta
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AI confidence in this obiter dicta summary: medium
The Tribunal observed that HMRC's mixed-aggregate construction could produce arbitrary and capricious losses of relief in practical situations (eg temporary loans or payment timing among subscribers) and noted that accounting recognition of commitments in a balance sheet does not, by itself, make such commitments "loan capital" for the statutory test.