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In Shinelock Ltd v HMRC [2021] TC08261, the First Tier Tribunal (FTT) dismissed the taxpayer’s appeal contending that a payment to a non-resident director shareholder was an allowable non-trading loan relationship deduction in computing the profits of a company.  Properly documenting the loan relationship or a deed of trust that was intended to keep beneficial ownership with an individual could have avoided a tax liability.

The FTT dismissed the appeal finding that:

Comment

This case is a welcome reminder to document any arrangements formally and to seek appropriate advice when drafting documents.

Had the deed of trust meant that the beneficial ownership remained with the taxpayer, as intended, no UK tax would have been paid as they were non-UK resident and the NTLRD point would have been mute.

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?

Joint property: legal v beneficial ownership
What is the difference between legal and beneficial ownership? What are the tax consequences? Are the rules different for married couples?

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

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? 

External links

Shinelock Ltd v HMRC [2021] TC08261


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