D Jacobson & Sons v HMRC

In D Jacobson & Sons v HMRC [2016] UKFTT 530 (26 July 2016) the FTT found that letters of comfort given by banks did not constitute payment for the purpose of the VAT Regulations SI 1995/2518 reg 165 so that D Jacobson was not liable to repay an amount previously refunded by way of bad debt relief.

Loan notes had been issued and monies borrowed as part of several company acquisitions by the group of D Jacobson. Following the financial difficulties of FFL another group company it had been feared that D Jacobson would default on its payment obligations leading other group companies to default on their own debt obligations which may lead to a breach of banking covenants.

The holders of the loan notes were approached to seek some form of comfort that sums falling due to those lenders could be...