Nicholas Pike v Commissioners for Her Majesty's Revenue and Customs
Decision date: 4 May 2011
Neutral citation: [2011] UKFTT 289 (TC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
Mr Pike purchased loan stock for £6m which carried a rolled‑up 7.25% per annum payment payable on redemption after 13 years; he transferred the stock to a family trust and claimed Schedule 13 loss relief treating the stock as a relevant discounted security (RDS). The Tribunal held that the additional rolled‑up sum was "interest" in the ordinary sense — a time‑based return calculable by reference to an underlying debt and accruing day to day even if payable only on redemption — so the loan stock was not an RDS. The appeal was dismissed and the claimed loss relief denied.
Ratio decidendi
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AI confidence in this ratio decidendi summary: high
The judgment adopts the ordinary and natural meaning of "interest" for Schedule 13: a sum calculated by reference to an underlying debt, representing payment for the time use of money and accruing day to day, which need not be paid periodically; a rolled‑up premium expressed as accruing at an annual rate can therefore be interest and not be recharacterised as non‑interest merely because it is paid as a single redemption sum.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The notes record observations that there was a legislative mismatch between the RDS and the advance interest supplement (AIS) regimes as to rolled‑up returns and that Parliament later amended Schedule 13 (para 9A) in 2002; and that contractual labels or "wrapping" do not determine the substance of an amount that is interest. These comments are informative but ancillary to the decision.