In WT Banks & Co (Farming) Ltd v HMRC [2021] TC08124, the First Tier Tribunal (FTT) found amounts paid by one company to another with a common shareholder were neither non-trading loan relationship debits when written off, nor loans to the controlling participator of the lender.

The FTT found that:


This case once again highlights the importance of documenting business arrangements.

Had WTB been able to show that there was a formal loan relationship in place which covered the payments, which totalled nearly £500k, a corporate tax deduction should have been available and professional fees saved.

While it may seem a tiresome requirement, even with the best intentions, business relationships can become strained and arrangements challenged by HMRC. Documenting agreements can help to prevent confusion and both substantial legal fees and tax consequences at a later date.

Useful guides on this topic

Loan Relationships
How are loans made to and by a company taxed? What are the rules when loans are written down? What is the difference between a trading and non-trading loan relationship? What are the rules for connected party loans?

Close company loans toolkit (loans to participators)
This guide takes a detailed look at the Corporation Tax treatment when a Close Company makes a loan to a participator (director-shareholder). It also provides links to our guides for individuals on the making of loans to companies.

Directors' loan accounts: Toolkit (Freeview)
At a glance: HM Revenue & Customs (HMRC) provide a Director's loan toolkit for advisers. This is our own version with planning points.

Closure notices
When does HMRC issue a Closure Notice? Can a taxpayer demand one? Are there appeal rights?

Statutory Review (by HMRC)
What is a Statutory Review? Is it automatic? What happens in a Statutory Review? Can you challenge a Statutory Review's findings? Can you influence a Statutory Review? 

How to appeal an HMRC decision
Disagree with a HMRC decision? How to appeal, what type of decision can you appeal, what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

External links

WT Banks & Co (Farming) Ltd v HMRC [2021] TC08124


Oak ad
Are you enjoying our content? 

Thousands of accountants and advisers and their clients use as their primary TAX resource.

Register with us now to receive our unique FREE Tax Planning Tips and Advice Guide & our FREE OMB Newsletter.