A UK company that wrote off part of a secured loan to another UK company was denied a tax deduction by the FTT. In Keighley, the FTT ruled that the write-off had an unallowable purpose under the loan relationship rules, as it was not in the business or commercial interests of the company. The FTT rejected the company’s argument that the purpose of the loan itself was relevant, and focused on the purpose of the write-off as a related transaction. This case is an important reminder of the ‘gateway test’ in CTA 2009 s 441 that applies when considering the tax deductibility of loan relationship debits. The FTT also found that the companies were not connected for tax purposes, which was another issue in dispute.
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A UK company that wrote off part of a secured loan to another UK company was denied a tax deduction by the FTT. In Keighley, the FTT ruled that the write-off had an unallowable purpose under the loan relationship rules, as it was not in the business or commercial interests of the company. The FTT rejected the company’s argument that the purpose of the loan itself was relevant, and focused on the purpose of the write-off as a related transaction. This case is an important reminder of the ‘gateway test’ in CTA 2009 s 441 that applies when considering the tax deductibility of loan relationship debits. The FTT also found that the companies were not connected for tax purposes, which was another issue in dispute.
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