Barnetts v HMRC

In Barnetts v HMRC (TC00575 – 2 August) a firm of solicitors received interest on short-term funds held in a clients’ account. In its tax return the firm treated this interest as trading income. HMRC issued an amendment on the basis that the interest could not be treated as trading income but had to be taxed as savings income. The First-Tier Tribunal allowed the firm’s appeal distinguishing the earlier decisions in Northend v White & Others ([1975] STC 317) and Nuclear Electric plc v Bradley ([1996] STC 405). Judge Bishopp held that ‘the interest was earned in the course of the solicitors’ trading and as an integral part of the trading activities’. On the evidence ‘the interest is properly to be regarded as part of the solicitor’s trading income because it was understood between solicitor and client that the interest would form part...