Tribunal: Taxpayer’s claim for business interest allowed
The Tribunal recently found in favour of a taxpayer whose claim for loan interest relief was denied by HMRC.
The taxpayer, T, was a director and chairman of Weatherwise (UK) Ltd, a wholly owned subsidiary of Openshield Ltd, of which T owned 50%.
T obtained a personal loan for 3 million Canadian Dollars from Arbitrage Research and Trading Ltd, which he loaned on to Weatherwise. He then claimed relief under TA 1988, s 353 on the loan interest paid to Arbitrage. HMRC refused to accep that the loan interest paid by T was eligible for relief. Fundamentally, it was the definition of ‘business’ that was crucial.
The tribunal ‘took into account the wide interpretation often given to the term business’ and subsequently decided under s 360(1)(b) that it was ‘a trade’. Applying the legislation to the facts of the case, the tribunal decided the appellant had used the loan ‘wholly and exclusively’ for the purposes of business.
The judge concluded that all of the relevant conditions of s 360 were met in relation to T’s loan to Weatherwise (UK) Ltd. As a result T’s appeal was allowed.