Lack of evidence

In May 2004 the two directors of a close company agreed to each pay £50 000 to a company in exchange for shares. No share certificates were issued and no corresponding records existed at Companies House. The company ceased trading in October 2004 and was dissolved in 2007.The directors claimed losses under TA 1988 s 574 in their tax returns for 2004/05. HMRC refused the claims on the ground there was no evidence the taxpayers had subscribed for shares in the company.

The directors appealed claiming the company was small and had operated with a degree of informality. They said s 574(3)(a) did not require that the shares had to have been issued. However they added the shares were issued; a letter from their consultant supported the claim.

The First-tier Tribunal said...