In Versteegh Ltd and Others v HMRC (TC/2012/5569 – 6 November 2013) groups of companies had entered into a scheme designed to achieve a corporation tax deduction for interest paid on intra group debt in one group company without the corresponding taxable income for the lending company. The ‘lender’ had made a loan to the ‘borrower’. The principal had been repayable to the Lender however the payment of interest was by an issue of irredeemable preference shares by the Borrower to a 100% subsidiary of the lender; the ‘share recipient’.
Firstly the tribunal found that the accounting treatment adopted by the lender – which did not recognize a profit from the loan – was compliant with FRS 5. The transaction had not created a new asset for the Lender - which had granted a valueless interest free loan.
Secondly ICTA 1988 s 786 did...
