TC09535 - [2025] UKFTT 00595 (TC)

Furthermore, we agree with Mr Gargan that, on the facts, the FHL exclusion also applies.

The property was being exploited in a property rental business as it was being let out on a commercial basis with a view to profit.

So, we need to look at who was actually carrying on that business as the person who is liable to tax on the profits of such a business is the person who receives or who is entitled to those profits.

There is no evidence whatsoever that the letting business was carried on by anyone other than the appellant. There is no evidence of a partnership between herself and her former husband. The fact that her former husband appears to have known that she was letting out the property does not mean that he was carrying on that business with her.

Nor does the fact that she was carrying it out with the benefit of the power of attorney. This simply allowed her to exploit the property in a number of ways, which she did by letting it out. It did not reflect the involvement of her former husband in that business.

Finally, simply because her former husband benefited from the use to which the income was put (it paid off debts for which he was jointly liable) does not mean that he was beneficially entitled to a half share of that income. It was simply that the income was applied by the appellant to pay debts for which he was jointly responsible. In order to be taxable, her former husband would have had to have been in receipt of, or entitled to, the income which he was not. It was the appellant alone who was carrying on the business and she who was therefore taxable on its income. We have no doubt that if someone had suggested to the appellant during the relevant tax years that she should pay away one half of the income to her former husband because he was entitled to it, that person would have got a very short shrift.

We can understand why the appellant submitted that her former husband had benefited, as this was the information sought from her by Officer Kane during her enquiries. And in Officer Kane’s view, he had not so benefited. But we are afraid for the appellant that benefitting from income derived from a business is not the correct test to determine whether a person should be taxable, to the extent of that benefit, on that income.

Finally, as regards the deductibility of loan repayments taken out for the purposes of acquiring the solar panels, we agree with Officer Gargan that we have insufficient information to enable us to allow any such expenditure as a pre-trading expense. We do not know whether the repayments were capital or income, nor indeed were we taken to any evidence of what the amounts of the repayments in fact were. We are afraid, therefore, that we cannot allow any of the repayments of the loans taken out to acquire the solar panels as a deduction against the appellant’s income for the relevant tax years.