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The taxpayer operated a number of Shell service stations. In so doing he was obliged to put up collateral which to satisfy he paid £150 000 as a single premium for overseas life policies issued by an Irish company in the HSBC banking group.
In 2006/07 Shell no longer required the full collateral and the taxpayer surrendered one-third of the rights under his policies and withdrew £50 000.
But he took no advice on the effect of the partial surrenders and the tax result was that HMRC added £42 500 to his other income in respect of the partial surrenders.
Furthermore since the policies were non-qualifying offshore arrangements no basic rate tax credit was given because the insurance company had not paid tax.
The taxpayer appealed.
The First-tier Tribunal sympathised with...
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