Fatal lack of records

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.

The result was that by 1 January 2004 Aegis owed MJP more than £6.8 million. Between that date and 26 March 2004 the parties signed a document agreeing MJP had loaned Aegis the sum in question. On 26 March the parties signed another agreement in which MJP waived £6.7 million.

In its 2004 corporation tax computation MJP claimed the amount 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...