Evidence does not support loan write off

The taxpayer was director and shareholder in BGH Ltd. He had a director’s loan account with the company. The company submitted a claim to HMRC for corporation tax paid on the DLA which was shown as having been written off in 2013-14.

The taxpayer did not refer to the loan write-off in his tax return. HMRC therefore assessed him to the income tax that it believed was due as a result of the write off. It also imposed a penalty for a careless inaccuracy. The taxpayer appealed.

The First-tier Tribunal found that it was ‘more likely than not that there was no writing-off’ of the taxpayer’s DLA in 2013-14.

First there was no documentation from that tax year to show the DLA had been written off. The company could have decided to write off the loan but the fact that it was not communicated to the taxpayer supported the finding that...