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The taxpayer company handled the image rights of Mr Lion. Mr and Mrs Lion are the directors of the company. In 1998 the company bought a house with the intention of making a payment in kind to Mr Lion.
The house was refurbished at a considerable expense and Mr Lion and his wife allowed to move in although the company at the time still owned the property.
The house was transferred by way of a discretionary bonus to Mr Lion in July 1999. It was valued at the time as worth £1.2 million.
The issue under appeal was the treatment of the cost of the property. The taxpayer claimed it was revenue expenditure and wrote it off in the relevant accounts.
HMRC said the property was acquired as a capital asset rather than a trading one.
Thus the loss was a capital loss on disposal of...
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