No bad debt relief due

The taxpayer company was owned by Mr S and Ms J. The shareholding was split so that the former owner held 49% and latter 51%.

Mr S resigned as a director in April 2008 and took a job at a bank although he remained a primary signatory on the company’s bank account. Between 28 March and 24 April he withdrew £110 900 from the accounts. Mr S and Ms J separated in October 2008.

HMRC made an amendment to the taxpayer’s corporation tax self assessments for the years ended 31 March 2008 and 2009.

The First-tier Tribunal found the sums withdrawn by Mr S were lent by the company as shareholder loans and were not held on trust for the business which had subsequently written off the amounts as bad and claimed a deduction as a trading expense.

The judge said the withdrawals were not undertaken...