TC09555 - [2025] UKFTT 00748 (TC)

Fecha: 09-May-2025

Findings of fact

Findings of fact

62.

We are satisfied on the evidence that 3KH received credit card payments for all such sales by TSL, paid suppliers and claimed input tax in respect of purchases made for operations at TSL in particular in connection with refurbishment costs a proportion of which arose after the point at which it is alleged that RM took over operations. Unless rebutted we consider that sufficient to conclude that 3KH were operating TSL.

63.

We consider the explanation given of and for the relationship between 3HK and RM to be confused and unclear. We note:

(1)

There is no evidence provided regarding the operational or financial difficulties said to have been experienced by TSM causing them to have to back away from the continued development and operation of TSL.

(2)

By reference to the narrative provided by 3KH RM was able to fund £350,000 in the period from March 2016 to April 2017.

(3)

3KH continued to incur expenditure on the property despite having apparently agreed in March 2016 that the restaurant would be operated under franchise, no details of the terms of the franchise agreement or basis of franchisor support was provided.

(4)

No explanation has been provided other than “mutually agreed” for the decision make the loan. On the testimony and by reference to the letters the loan was in addition to the franchise agreement which represented the only source of the anticipated receipt of royalty income.

(5)

The loan agreement shows that it was signed on 30 March 2017. And yet no later than days after its signature RM was unable to obtain the credit approval to open a merchant acquirer account. That failure met the terms of a default event entitling 3KH to terminate the agreement.

(6)

Despite the terms of the agreement being for repayment by 31 December 2018 no profile for repayment was agreed within the document. Correspondence with HMRC indicates that it was agreed that £40,000 would be repaid monthly but no evidence of that agreement has been provided.

(7)

Whilst HMRC have been able to create an analysis of the credit card receipts and the TSL invoices paid but 3KH did not appear to do so. HMRC’s calculation of the credit card income retained does not match the amount stated to have been outstanding by 3KH in correspondence.

(8)

As summarised at paragraph 53 above, the correspondence between 3KH and RM/AN’s legal advisors did not clearly frame the dispute between the parties and did not therefore does not cast much if any light on the true nature of the relationship.

(9)

If 3KH had made a loan to RM/AN as asserted the statutory accounts would have been required to reflect the debt as an asset but there is no such entry. The accounts are broadly consistent with 3KH operating the TSL business (as some, but not all, of the expenditure on refurbishment could have been included in plant and machinery) but suppressing the sales.

64.

We make no finding whether the arrangements and the documentation of them were a sham. However, on the basis of our finding at paragraph 62 above we consider that it was for 3KH to provide a coherent rebuttal for the reasonable inference that it operated TSL. For the reasons outline in paragraph 63 they have failed to do so.