In Stephen Schechter and Lawrence Schechter v HMRC  TC05677 shareholders claimed that their property companies held their respective properties on trust as their nominees so that they could claim loss relief for development losses.The accounts and paperwork told a different story and tribunal did not believe them.
- The taxpayers, a father and son owned two companies which owned property in France and London.
- One company was registered in the Bahamas and the other in England. The taxpayers were US citizens and UK resident.
- The companies made losses on development.
- The individuals claimed tax relief for the companies’ losses on the basis that the companies were holding the properties as their nominees and the property was held as their personal trading stock.
- HMRC made enqiries into the claims and amended their returns to disallow loss relief. The taxpayers appealed to the tribunal.
The FTT found that in principle it was possible to have created trusts however there was insufficient evidence that the intended planning had been carried through and one of the taxpayers was an unreliable witness.
- One of the trusts was incorrectly executed and that company also had insufficient reserves to allow a return of capital to shareholders.
- In the case of the other company, the trust was a sham as the other company still showed the property on its own balance sheet.
The appeal was rejected.
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