Simon Hackett & Anor v The Commissioners for HMRC
Decision date: 15 August 2024
Neutral citation: [2024] UKFTT 749 (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
This is an appeal by Simon and Edward Hackett against HMRC closure notices taxing FCA redress and associated 8% interest paid by banks for mis‑sold interest rate hedging products. The Tribunal held the basic redress compensated deductible business expenditure (the losses the appellants had previously deducted) and was therefore revenue and taxable as profits of their property business. The 8% payments (and the RBS interest) were held to be interest (compensation for the time value of money) and taxable under s.369 ITTOIA. The appeals were dismissed and HMRC’s assessments upheld.
Ratio decidendi
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AI confidence in this ratio decidendi summary: high
Where a payment is made to put a business back into the position it would have been in but for the wrongful act, the proper characterisation requires identifying what the payment was paid for; if it compensates deductible business expenditure it is revenue in nature and taxable as trading/professional income. Separately, payments that compensate for the time value of money are properly characterised as interest and taxable under the statutory interest provisions independently of the character of the principal 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 Tribunal criticised attempts to determine tax characterisation by extended economic, philosophical or semantic argument when statutory language and established authorities govern the analysis. It also commented procedurally that documents labelled "skeleton argument" should not be used to present extensive full submissions without directions.
Warning
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