Lack of evidence

The taxpayer company MJP Media was a wholly-owned subsidiary of Carat International which itself was wholly owned by Aegis plc.

Between 2001 and 2004 various inter-company transactions took place between MJP and Aegis resulting in Aegis owing MJP more than £6.8 million.

MJP Media claimed the amount in its 2004 corporation tax computation as a deduction. HMRC refused the claim.

The company appealed claiming the transaction fell within the loan relationship rules in FA 1996 s 81 (now CTA 2009 s 302).

The First-tier Tribunal noted there was a lack of documentary evidence - for example bank statements - to support the company’s claim and none of the company’s witnesses had personal knowledge of the transactions.

It was for the company to prove it had lent money...