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Hexagon Properties Ltd v HMRC [2022] TC08468

Posted: 17 Jan 2024
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Elysium Law acted for the Appellant in Hexagon Properties Ltd v HMRC [2022] TC08468. 

The First Tier Tribunal (FTT) found that the write-off of a loan relationship debt was not subject to tax under the loan relationship code as the profit which arose related to a compensation claim brought by the taxpayer against their bank and not to the debt.

  • Hexagon Properties Ltd (Hexagon) brought a claim against their bank for mis-selling an interest hedging product.
  • As part of the settlement of that claim, the bank released a debt of £3.5m.
  • Hexagon filed their corresponding tax return on the basis that the debt release represented a payment in settlement of the claim. It was therefore a capital receipt outside of a corporate tax charge under the loan relationship rules.
  • HMRC enquired into the tax return claiming the amount of the debt release was taxable as a loan relationship profit.
  • Hexagon Appealed

The FTT allowed the appeal, finding the write-off was not a profit from a loan relationship.

This was a case of great importance and had a significant impact on the loan relationship rules.

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