The timing of any write-off.
Even though we have found that the loan was not written off, as we heard submissions relating to timing, we include them here for completeness.
Mr Quillan contended that, if the loan was written off, then it must have been written off during the 2017-18 tax year, outside of the year of assessment. He provides the following grounds for this assertion:
(1) The ordinary meaning of the term "written off" is to accept that an amount of money has been lost or that a debt will not be paid.
(2) It is clear from the Annual Progression Report that the liquidator did not anticipate receiving any repayment in excess of the agreed £57,500.
(3) If the liquidator stating that he did not anticipate receiving any further payment amounted to an acceptance that the loan was written off, the date of the write-off would fall on or before 29 January 2018, the date of the Annual Progression Report, which is outside of the 2018-19 tax year of assessment.
(4) A debt can only be written off once, therefore it cannot have been written off during the 2018-19 tax year and therefore HMRC's assessment is wrong.
Mr Quillan also refers to a statement of company affairs dated 16 January 2017, when the resolution was passed to wind up BOH. He said that the "Estimated to Realise" amount is £395,684. However, in the Report, the amount stated under "Anticipated Future Realisations" is £57,500. Mr Quillan argued that, if the debt was written off, then it must have been written off between 16 January 2017 and 29 January 2018, before the 2018-19 year in respect of which the assessment was raised.
Finally, Mr Quillan said that HMRC have argued that the debt was written off by definition as the company was dissolved, and the debt remained outstanding. As the company was not dissolved until 15 April 2020, if HMRC are correct that the debt remained outstanding when the company was dissolved, the earliest date the loan could have been written off was on that date, outside of the 2018-19 year of assessment.
Mr Barrett submitted that a write-off involves less formality than the process of releasing a debt. He said that, by the date of the Report, the liquidator had accepted that no more funds were available and that the loan had effectively been written off. This is the liquidator's final report, in which he says that no more funds are expected.
He said that, by contrast, the Annual Progress Report is not final: it is a progress report. For this reason, the debt had not been written off by this stage: at this time, the liquidator was still progressing with the liquidation process.
Given that we have found that the Director's Loan Balance was not written off, we need make no finding in relation to timing. However, as discussed at [61-62] above, as at the date of the Report, the liquidator had made a clear choice neither to release nor to write off the Director's Loan Balance. In our view, it would therefore be wrong to find that either a release or a write-off had taken place at that time.
Decision
Having found that the Director's Loan Balance was neither written off nor released, it follows that this appeal is ALLOWED. We find that there is no basis for the assessment to tax set forth in the Closure Notice. The matter of timing therefore falls away and does not need to be decided.
Right to apply for permission to appeal
This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to "Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)" which accompanies and forms part of this decision notice.
Release date: 10 th APRIL 2025