Relief for payment under guarantee

The taxpayer set up MCE as a joint venture with the aim of buying and developing a site. It obtained planning permission but was unable to continue because of ‘the slump in property prices’. Beyond spreadsheets for the years ending 28 February 2008 and 2009 there was little other evidence about the company. 

The taxpayer was a guarantor of MCE. In March 2012 he as guarantor made a payment to the company’s bank. He claimed relief for loans to traders under TCGA 1992 s 253 for 2009-10 and 2010-11 but HMRC disallowed his claim. It considered that the capital loss did not arise until the payment was made in March 2012 and could not be used to offset any capital gains for earlier years.

The First-tier Tribunal accepted the taxpayer had made the payment under the guarantee (s 253(4)(b)). This was on the basis that the link...