CheckLists.Tax (beta)
K2. Incurring a debt
GENERAL
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Identifying a debt
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- 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.
Legislation:
Cases: Marren v. Ingles [1980] STC 500 at 506;
HMRC manuals: (CFM31030)
Commentary:
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- Reciprocal amounts owed may give rise to a single debt
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- 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: CTM61565;
Cases: Ramsden v. CIR 37 TC 619
HMRC manuals:
Commentary: Practical Point re Combining Accounts (L Skyes);
See also:
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INCOME TAX
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Transactions in securities
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- Issuing a debenture to shareholders did not give rise to a tax advantage, but redemption did
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- 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:
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EMPLOYMENT RELATED ISSUES
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Any form of credit treated as a loan to employee
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- 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:
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