TC09518 - [2025] UKFTT 00528 (TC)

Thermoline is a close company under section 439 Corporation Tax Act 2010 (CTA) which was incorporated on 13 February 1989 (then under the name Astormere Limited). During the tax year ended 5 April 2021 and on a continuing basis the Appellant was a director of Thermoline. Prior to 2 July 2020 the Appellant was the sole shareholder. The Appellant therefore meets the definition of participator in section 454 CTA.

On 2 July 2020 following a share for share exchange Property Holding SW Limited (PHSW) became the holding company of Thermoline. During the tax year ended 5 April 2021 and on a continuing basis the Appellant was a director of PHSW.

Thermoline incurred expenditure on behalf of and/or advanced sums to the Appellant. The sum outstanding on the director’s loan account on 31 March 2020 was £309,338. Further indebtedness arose in the accounting period ended 31 March 2021 and the sum outstanding on 31 December 2020 was £512,713.89.

Thermoline was liable to a charge to corporation tax under section 455 CTA in each tax year in which his indebtedness to Thermoline increased to tax year ended 5 April 2021.

We have no evidence as to the motivation or context prompting it but on 16 March 2021 the Appellant, Thermoline and PHSW entered, by way of deed, a novation of the sums outstanding on the director’s loan account (Novation Deed). The terms of the Novation Deed (which we address below) were that the novation itself was deemed to take effect on 31 December 2020 and that the Appellant continued to have a liability in respect of the sums to PHSW rather than Thermoline.

Thermoline claimed and was granted relief in respect of the section 455 CTA charge under section 458 CTA as regards the balance to 31 March 2020. Such relief was repaid on 9 November 2022. HMRC accepted that no tax fell due in respect of the sums advanced in the period from 31 March 2020 to 31 December 2020 on the basis that in consequence of the Novation Deed the sums so advanced had been released (as per the claim to that effect dated 10 February 2022) by Thermoline on 31 December 2020 and thereby within 9 months of the year end.

The Appellant rendered his tax return for the tax year ended 5 April 2021 on the basis that he had received no deemed payment of dividend income in respect of the sums which were the subject of the Novation Deed.