Barnes v Revenue & Customs [2011] UKFTT 95 (TC) (31 January 2011)

Barnes v Revenue & Customs [2011] UKFTT 95 (TC) (31 January 2011)

The Tribunal found that all transaction documents were executed and implemented as stated. However, the scheme's steps, viewed as a composite transaction, did not satisfy the substantive entitlement required under the accrued income scheme for relief. The manufactured interest payment was not deductible as claimed, as the arrangement fell within the capital gains tax exemption provisions, excluding relief under s 713(2) TA 1988. The appeal was dismissed.

Citation
[2011] UKFTT 95 (TC)
Parties
Appellant: Mr Nicholas Barnes; Respondents: The Commissioners for Her Majesty’s Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
31 January 2011
Procedural Posture
Income Tax Appeal / First Tier Tribunal Decision
Outcome
Appeal dismissed
Legal Topics
Income Tax, Corporation Tax, Tax Avoidance, Accrued Interest, Manufactured Interest, Stock Lending, Relief Provisions
Tax Law Income Tax Corporation Tax Tax Avoidance Accrued Interest Manufactured Interest Stock Lending Relief Provisions

Case Brief

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Parties

Mr Nicholas Barnes

Appellant

The Commissioners for Her Majesty’s Revenue and Customs

Respondents

Procedural Posture

Income Tax Appeal / First Tier Tribunal Decision

Legal Issues

  1. 1 Whether the accrued income scheme rules under Chapter II of Part XVII ICTA 1988 relieve the appellant from liability on interest income received from borrowed gilts
  2. 2 Whether the manufactured interest payment under Schedule 23A ICTA 1988 is deductible against total income
  3. 3 Whether the stock lending arrangement falls within the capital gains tax exemption provisions and thus excludes relief under s 713(2) TA 1988

Ratio Decidendi

The Tribunal found that all transaction documents were executed and implemented as stated. However, the scheme's steps, viewed as a composite transaction, did not satisfy the substantive entitlement required under the accrued income scheme for relief. The manufactured interest payment was not deductible as claimed, as the arrangement fell within the capital gains tax exemption provisions, excluding relief under s 713(2) TA 1988. The appeal was dismissed.

Court Disposition

Appeal dismissed

Orders

  • The closure notice issued by HMRC is upheld
  • No relief or deduction is allowed for the manufactured interest payment under Schedule 23A ICTA 1988