Nature of borrowing

The taxpayer and his wife owned a rundown caravan site in Yorkshire. They decided to develop the land for the rental and sale of retirement homes and mobile dwellings. They formed a company for this and future trading activities.

In June 2004 Lloyds TSB bank offered the taxpayers a personal overdraft facility of £1 045 000. It included ‘any other account that may be opened as a replacement or substitution for it’.

The taxpayer and his wife said they intended at some stage to transfer the overdraft borrowings into the name of the company but for the time being the facility was provided to the taxpayers personally rather than the company.

The appellant submitted self-assessment tax returns on which he included interest received from the company of £175 £135 and £96 for the years 2003/04 to 2005/06...