12 March 2024

Timothy Bunting v HMRC (12th March 2024)

This case is about trading loss relief for capital gains tax (s 253 TCGA).  The taxpayer had invested several million pounds by way of loan in a sports memorabilia business which had failed.  In the run up to liquidation, he exchanged c. £2 million of the debt owed to him, which was irrecoverable, for shares, hoping to be eligible for share loss relief against income tax.  HMRC refused that relief on the basis that the shares were worthless when acquired, but also refused s 253 relief for CGT (which is granted where a loan to a trader has become irrecoverable) on the grounds that the relief is only available if the loan is still enforceable, and also on the grounds that the loan had in fact been repaid, albeit in worthless shares.

Thomas Chacko represented the taxpayer who successfully appealed, persuading the Tribunal that HMRC’s interpretation of s 253 was wrong, that the Crosby v Broadhurst had not been superseded by legislative changes, and that HMRC’s policy of denying relief where an irrecoverable loan had been exchanged for shares was wrong.

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