Powell v Revenue and Customs (INCOME TAX - section 415 Income Tax (Trading and Other Income) Act 2005 - whether, pursuant to deed of novation, there had been a release or repayment of participator loan) [2025] UKFTT 528 (TC) (09 May 2025)

Powell v Revenue and Customs (INCOME TAX - section 415 Income Tax (Trading and Other Income) Act 2005 - whether, pursuant to deed of novation, there had been a release or repayment of participator loan) [2025] UKFTT 528 (TC) (09 May 2025)

The deed of novation released the appellant from his indebtedness to Thermoline, but Thermoline did not recover its money; instead, the debt was substituted by an equivalent obligation from PHSW. This constitutes a taxable release under section 415 ITTOIA 2005, not repayment or satisfaction. Therefore, the appellant is liable to income tax on the deemed dividend.

Citation
[2025] UKFTT 528 (TC)
Parties
Appellant: Nicholas Powell; Respondents: The Commissioners for His Majesty's Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
09 May 2025
Procedural Posture
Income Tax Appeal / First Tier Tribunal (tax Chamber) Substantive Judgment
Outcome
Appeal refused
Legal Topics
Income Tax, Close Companies, Participator Loans, Deed of Novation, Section 415 ITTOIA 2005, Section 455 CTA 2010, Section 458 CTA 2010
Tax Law Income Tax Close Companies Participator Loans Deed of Novation Section 415 ITTOIA 2005 Section 455 CTA 2010 Section 458 CTA 2010

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Parties

Nicholas Powell

Appellant

The Commissioners for His Majesty's Revenue and Customs

Respondents

Procedural Posture

Income Tax Appeal / First Tier Tribunal (tax Chamber) Substantive Judgment

Legal Issues

  1. 1 Whether, pursuant to the deed of novation, there had been a release or repayment of a participator loan within the meaning of section 415 ITTOIA 2005 and whether the appellant is liable to income tax on a deemed dividend payment.

Ratio Decidendi

The deed of novation released the appellant from his indebtedness to Thermoline, but Thermoline did not recover its money; instead, the debt was substituted by an equivalent obligation from PHSW. This constitutes a taxable release under section 415 ITTOIA 2005, not repayment or satisfaction. Therefore, the appellant is liable to income tax on the deemed dividend.

Court Disposition

Appeal refused

Orders

  • The appeal is refused. HMRC's closure notice and amendment to the appellant's 2020/21 tax return stand.