Tax cases

Purpose of loan

The taxpayer was the sole director and shareholder of a company. The company's current account was overdrawn and in 1993 the bank granted the company a 20-year loan. The loan was to refinance existing borrowings and was secured by second legal charges on two freehold properties owned by the taxpayer.
A year later the taxpayer sold one of the properties and realised a chargeable gain. He also paid some of the proceeds to the bank in order to reduce his company's loan account. The taxpayer claimed to have the amount paid to the bank set off against his CGT liability under TCGA 1992 s 253.
The Revenue refused the claim saying that it was impossible to separate the company's affairs from those of the taxpayer.
The taxpayer appealed to the General Commissioners. They held that the bank loan was effectively...