Tax relief forfeited
Tax relief forfeited
- 1989
- Taxation 123(3204) 15 June 1989, 326-327(2) .
Discusses R v Inspector of Taxes ex parte Brumfield and others, (WB2447-47) which involved a farming partnership between Mr & Mrs B and their son. The son arranged to purchase the farm with a cousin at a cost of £249,558, financed partly by an interest free loan of £210,559, with no stated date of repayment, from the partnership. This sum had been borrowed from a bank. The sons land was farmed by the partnership, on a rent free basis the loan interest being regarded as in lieu of rent. Interest in the partnership accounts totalled £25,480, as reflected in the balance sheet as part of the bank borrowing. A separate amount of £120,559 was shown as a loan due from the son. The accountants claimed these transactions fell within Statement of Practice SP4/85 but wrote to the Inland Revenue for confirmation. The claim was rejected; the interest on the loan ought not to be treated as a trading expense as the loan was not used to purchase an asset but to lend to the son. Also it was usual for
Discusses R v Inspector of Taxes ex parte Brumfield and others, (WB2447-47) which involved a farming partnership between Mr & Mrs B and their son. The son arranged to purchase the farm with a cousin at a cost of £249,558, financed partly by an interest free loan of £210,559, with no stated date of repayment, from the partnership. This sum had been borrowed from a bank. The sons land was farmed by the partnership, on a rent free basis the loan interest being regarded as in lieu of rent. Interest in the partnership accounts totalled £25,480, as reflected in the balance sheet as part of the bank borrowing. A separate amount of £120,559 was shown as a loan due from the son. The accountants claimed these transactions fell within Statement of Practice SP4/85 but wrote to the Inland Revenue for confirmation. The claim was rejected; the interest on the loan ought not to be treated as a trading expense as the loan was not used to purchase an asset but to lend to the son. Also it was usual for