In Ian Shiner & David Sheinman v HMRC [2020] TC7779, the First Tier Tribunal (FTT) disallowed interest on loans to members of a trading partnership. The loans were taken by the partners as investors and not the partnership and the interest paid was not wholly and exclusively for the partnership trade.

Interest is deductible in computing the trading profits of a partnership if that interest is:

The appellants owned a property development group and were parties to a tax scheme involving an Employee Benefit Trust (EBT):

The FTT considered: was the interest an expense of the partners or partnership? Was it income or capital in nature and whether it was incurred wholly and exclusively for the purposes of the partnership trade? The Tribunal concluded:


Taxation of partnership expenses has long been a problem area, with changes to HMRC’s own guidance in recent years causing much confusion. The current position is that if the partnership does not bring an expense into the accounts but does include it in the partnership return, then a deduction is available as long as the 'wholly and exclusively' test is met.


Partnerships: Rolling update
A guide to recent changes and basic principles around the taxation of partnerships.

Wholly and exclusively…toolkit
Revenue expenditure in a trader's or company's accounts is disallowed for tax if it is not 'wholly and exclusively' incurred for the purpose of the business.

Trusts & Tax Planning
What is a trust? How can trusts be used in tax planning? What the advantages and what are the pitfalls?

EBT Schemes
Where are we now?

External link

Ian Shiner & David Sheinman v HMRC [2020] TC7779