Wrong claim

Penalty for erroneous claim for capital losses

The taxpayer who was the sole shareholder and director of KXDNA loaned it £9.9m in 1999. In 2004 a second investor was sought and the taxpayer’s loan was converted into shares. In 2009 the directors of KXDNA waived a loan of £7.7m owed to it by an associated company KX Gym.

The taxpayer claimed relief under TCGA 1992 s 253 in his tax return on the basis that loans he had made to KXDNA were irrecoverable. HMRC refused the claim and issued an assessment to recover the tax. The taxpayer later withdrew his s 253 claim.

However HMRC imposed a penalty for careless behaviour for an inaccuracy in his return against which he appealed.

The First-tier Tribunal said it should have been clear to the taxpayer that ‘more checking was required’ to ensure that the waiver...