Upper Tribunal Tax and Chancery Chamber

[2025] UKUT 00185 (TCC)

Fecha: 09-Abr-2025

Residential property

Residential property

382.

The other reason put forward as to why the CLIP loan estimate of £574m could not be relied upon was because some of the loans classified under that heading might have been residential loans, for which the correct risk weighting would have been 35%.

383.

However, the only contemporaneous evidence about this possibility was as follows:

(1)

On 16 July 2018, Mr Richardson emailed Ms Gillan and Mr Somers about the need to change the risk-weighting for CLIP loans (see §108), and added this final paragraph:

“One upside is that I think that many of the ‘retail commercial mortgages’ on CHL (London & Canberra) currently marked at 50% are loans to ‘personal investment companies’ for residential properties, so would qualify as retail under CRR Article 125 and hence 35%.”

(2)

On 17 August 2018, Mr MacLean emailed Mr Arden with a list of data issues, one of which was that “Regulatory Reporting team have also performed some sampling testing and have observed loans secured by residential properties being classified as ‘Commercial Owner Occupier’”, see §119.

(3)

The presentation pack provided for the meeting between Mr Arden, Mr Somers, Ms Gillan and others on 3 September 2018 to discuss the RWA issue stated that “there is limited potential mitigation in trading book assets with residential property security but this would need case by case review”, see §128.

(4)

The minutes of that meeting said (see §129) that “potentially a small portion of this book that was actually secured on residential property and had actually been miscoded. Analysis suggests this is likely no greater than £20m of RWA.”

384.

Mr Arden agreed in cross-examination that unless virtually all of the CLIP loans had been wrongly classified, and should instead have been residential loans, the result would still be a “substantial uplift” in the RWA number.

385.

We find as a fact on the basis of the contemporaneous evidence that the number of residential loans which were miscategorised as CLIP was small, in the region of £20m, and that this was immaterial in the context of the overall risk-weighting correction required for CLIP.