JS Torkington v HMRC

In JS Torkington v HMRC (TC00706 – 12 October) a company (W) received a substantial loan from its chairman (T) who had financed this by a loan from another company. T claimed relief under what is now ITA 2007 s 392 for the interest he paid on the loan to him. HMRC rejected the claim on the basis that the loan did not meet the statutory conditions because W had lent the money to an associated Canadian company (WA) rather than using it for its own business. T appealed contending that W’s loan to WA should be treated as part of W’s business. The First-Tier Tribunal accepted this contention and allowed the appeal applying the principles laid down by Lord Diplock in American Leaf Blending Co v Director-General of Inland Revenue (Malaysia) [1978] STC 561.

Why it matters: In the American Leaf Blending Co...