Indeterminate loans

Claim for bad debt relief

The taxpayer was a sole trader running a skip hire business. In 2014 he appealed to the First-tier Tribunal against HMRC’s refusal to give relief for bad debts owed by his father’s company MWL. This was on the grounds that the loans were capital investments and not wholly and exclusively for the purpose of the trade.

The tribunal dismissed his appeal but the Upper Tribunal decided the case should be remitted to a differently formed First-tier Tribunal for a re-hearing.

At the second hearing the tribunal judges accepted that the taxpayer had made payments to MWL to enable it to pay its wages suppliers and tax. This was important to the taxpayer because MWL provided the facilities and services to him to operate his business.

Further the tribunal agreed that some of the payments were loans; they were interest free and...