In Benoit d’Angelin v HMRC [2025] UKUT 00212, the Upper Tribunal (UT) found that the provision of a Director's Loan Account (DLA) was an extraction of value, such that Business Investment Relief (BIR) was not available.
Mr d'Angelin, a UK resident and non-UK domiciled individual, was a Remittance Basis user.
- In December 2016, he introduced £1.5m of foreign income to his wholly owned UK company, d’Angelin and Co Ltd (DAC).
- Following a claim for Business Investment Relief (BIR) in the 2016-17 tax year, this foreign income was treated as not remitted to the UK and was therefore not taxable.
- Mr d'Angelin subsequently used his Director’s Loan Account (DLA) in DAC to pay personal expenses, particularly private travel costs. The debit balance on the DLA reached £71,515.
- HMRC opened an enquiry into Mr d'Angelin's 2017-18 tax return, eventually issuing a Closure Notice.
- HMRC considered the provision of the DLA constituted an ‘extraction of value’ for the purposes of BIR, meaning that relief was not due and the £1.5m investment should have been taxed as a remittance.
- Together with the omission of employment benefits for 2017-18, HMRC assessed Income Tax due of £675,307.
- Mr d’Angelin Appealed to the First Tier Tribunal (FTT).
- His key ground for appeal was that on a proper interpretation of the legislation the extraction of value rule was not breached because a receipt of value must mean a receipt of net value.
The FTT found that:
- The relevant legislation on BIR allows remittance basis taxpayers to make genuine commercial investments without a remittance occurring, subject to conditions to avoid abuse.
- Although Mr d'Angelin had significant personal funds available, the loan was not paid off in full at any time. Equally, the company could have paid a dividend at any time to clear the loan.
- The appellant’s interpretation of ‘net value’ was not accepted as “it is doing violence to the statutory language in circumstances where it is not plain there has been a drafting mistake.”
- Mr d'Angelin's legal advice of December 2016 included a warning that “Any…use of company’s assets personally would be treated as an extraction of value and would breach the conditions of the [BIR] relief".
- The interpretation given to the legislation by HMRC did not offend the Human Rights Act 1998, Protocol 1, Article 1: Protection of property.
- There was an extraction of value within the proper meaning and effect of the legislation, which was not with the exemption that might have been available.
Mr d'Angelin appealed to the Upper Tribunal (UT), which found that the FTT had correctly concluded that there was an extraction of value.
- The UT examined the statutory meaning of 'extraction of value' under section 809VH(2) ITA 2007, focusing on whether the provision of the loan involved the realisation or removal of company value to the director.
- The UT found that the word 'value' did not require the recipient to be better off overall or on a net basis.
- The provision of the DLA was not saved from being an extraction of value:
- The amounts advanced under the DLA were not treated as the receipt of income for tax purposes. The fact that an element representing deemed interest was treated as earnings from employment and taxed as such did not save the principal amounts loaned to Mr d'Angelin.
- It was not an arm's length loan because it was created informally and was interest-free, unsecured, and repayable on demand.
- The UT concluded that the provision of the DLA constituted an extraction of value and therefore, BIR was not available.
The appeal was dismissed.
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Closure notices
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External sources