In Jamie White v HMRC [2018] UTUK 0087 the Upper Tribunal (UT) denied income tax relief on irrecoverable loans to a trading company; they were capital in nature and not wholly and exclusively for the taxpayers trade.

Relief is available against business profits for debts which are:

  • Bad, estimated to be bad, or released as part of a statutory insolvency arrangement (s35 ITTOIA 2005)
  • Not capital in nature (s33 ITTOIA)
  • Wholly and exclusively for the purposes of the trade, profession or vocation (s34 ITTOIA)

Jamie White was self-employed and ran a skip hire business:

  • Over a three-year period he loaned £147,330 to a loss making company owned by his father.
  • He wrote off the loans and claimed a deduction from his trading profits claiming that his business depended on his father’s company to survive and this made the loans trading expenses.
  • HMRC opened an enquiry and immediately issued a closure notice. They disallowed the loans as capital in nature and not wholly and exclusively for Mr White’s business.
  • Mr White appealed to the First tier tribunal (FTT) who agreed with HMRC. The judge also stated that he was not satisfied that the loans existed and could not identify the amount of the debt.

The Upper tribunal dismissed the appeal:

  • The appellant had not satisfied the burden of proof as to the existence and amount of the debt and the FTT was entitled to conclude this.
  • He was not a money lender; his loans were an investment in the company and capital in nature, making any loss on them a capital loss. This was not altered by his motive for making the loans, i.e. to ensure that the company could provide him with essential business facilities.

The reason for the long delay (four years) in this case coming to the Upper tribunal is that, at the UT’s invitation, it was first remitted back to the FTT to be re-heard by a different panel. An unusual step but one which did not change the ultimate result.


Our guides:

Wholly and exclusively…toolkit 

CGT relief: Loans to traders 

Losses, trade losses and sideways relief


Jamie White v HMRC [2018] UTUK 0087 (UT) 

Jamie White v HMRC [2014] TC03186 (FTT) 


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