CheckLists.Tax (beta)
K2. Incurring a debt
GENERAL
Identifying a debt
- Contingency and whether sum ascertained
- Includes contingent debt.
- Can includes a liability to pay unascertained amount.
- Does not include contingent right to receive an unascertainable amount at an unknown date.
- Fact that a sum is only payable in the future does not mean it is not property (Thomas, §80).
- Does not matter that payment was dependent on taking a procedural step (e.g. submitting a tax return) (Thomas, §81).
Legislation:
Cases:
Marren v. Ingles [1980] STC 500 at 506;
Thomas v. HMRC [2025] UKFTT 1537 (TC), Judge Blackwell;
HMRC manuals: (CFM31030)
Commentary:
- Reciprocal amounts owed may give rise to a single debt
- Set off against an account in credit (CTM61565).
- Debts in reciprocal directions where the evidence indicates there is genuinely a single account (CTM61565).
- Opposing demands connected by originating in the same transaction are treated as a single debt.
- Nature of dealings may indicate that the agreement is for a single debt.
Legislation:
Cases: Ramsden v. CIR 37 TC 619
HMRC manuals: CTM61565;
Commentary: Practical Point re Combining Accounts (L Skyes);
See also:
- Damages and compensation
Discretionary awards
- The obligation to pay a sum as a result of an unfair prejudice petition "arises only by virtue of the court's exercise of its very wide discretion...The court might conclude that relief should take the form of the transfer of property rather than a monetary payment" (THG Plc, §146).
Legislation:
Cases:
THG Plc v. Zedra Trust Company (Jersey) Ltd [2026] UKSC 6;
HMRC manuals:
Commentary:
See also:
INCOME TAX
Transactions in securities
- Issuing a debenture to shareholders did not give rise to a tax advantage, but redemption did
- IRC v. Parker - company capitalised profits and issued debentures to taxpayers which it redeemed 7 years later. HoL held that there was, upon issue of the debenture, "no receipt by him of anything, which, if it had been given to him in another way, would have been liable to tax" such that no tax advantage arose when the debentures were issued.
- See now, however, the definition of income tax advantage in ITA s.687.
Legislation:
Cases: IRC v. Parker [1966] AC 141.
HMRC manuals:
Commentary:
See also:
EMPLOYMENT INCOME TAX
Any form of credit treated as a loan to employee
- See K1: Making/Receiving a loan
Legislation: ITEPA s.173(2)(a)
Cases: Grant v. Watton 71 TC 333;
HMRC manuals: EIM26108;
Commentary:
See also:
- Misappropriations not a form of credit
- "A charge on the company under s455 does not replace any tax charge under Chapter 7 of Part 3 ITEPA2003 (previously s160 ICTA 1988) and Class 1A NICs charges on the recipient and employer respectively except where the loan account becomes overdrawn because of misappropriations." (NIM12020).
Legislation:
Cases:
HMRC manuals: NIM12020 - Class 1: Calculating Class 1 NICs for Directors: Directors' loan accounts: Other liabilities;
Commentary:
See also: