Timothy Bunting v The Commissioners for HMRC

Relief for an irrecoverable trading loan under section 253 of the Taxation of Chargeable Gains Act 1992 requires an outstanding principal amount when the claim is made. An amount is outstanding only where it remains legally due and there is a legal right to pursue it. A debt released in exchange for shares therefore ceases to qualify, even where the shares have no significant value. Possible adverse consequences in insolvency do not displace that construction. The guarantor provisions are consistent with it because payment under a guarantee may leave the borrower legally liable to the guarantor through indemnity and subrogation.

Timothy Bunting financed a company's trade through unsecured, interest-free loans. After its business became unsustainable, he released £2.2 million of indebtedness in exchange for 2.2 million fully paid shares. The company and the shares had no market value, and the company subsequently entered members' voluntary liquidation. He abandoned an intended income tax loss claim because the shares had been worthless when issued.

HMRC refused his alternative claim for trading-loan relief under section 253 of the Taxation of Chargeable Gains Act 1992. The First-tier Tribunal allowed his appeal, construing an outstanding amount as an unpaid amount. The Upper Tribunal reversed that decision in [2025] UKUT 00096 (TCC). His further appeal concerned whether the released indebtedness remained outstanding, and whether the statutory context, insolvency consequences or guarantor provisions supported relief.

The appeal was dismissed unanimously. Newey LJ gave the leading judgment, with which Phillips and Miles LJJ agreed.

1. In section 253(3)(a) of the Taxation of Chargeable Gains Act 1992, an outstanding amount meant an amount remaining legally due. There had to be a legal right to pursue it. The natural meaning required continuing indebtedness, rather than merely an absence of payment. The reference to an amount accommodated principal-only relief, partial discharge or release, and partial irrecoverability (paras 29–32, 48).

2. The statutory context supported that construction. Section 253(3)(b) and the recovery provisions in subsections (5) and (9) referred to rights of recovery. Subsections (3)(a) and (3)(b) performed different functions: the former concerned the loan's status, while the latter concerned the claimant's identity. The conditions were assessed when the claim was made, rather than when the loan became irrecoverable (paras 33–35, 47).

3. The construction adopted in Crosby v Broadhurst [2004] SpC 416, permitting relief without subsisting indebtedness, was erroneous. The release extinguished the relevant debt, so its lack of repayment and the shares' lack of value did not preserve entitlement. Under sections 580 and 583 of the Companies Act 2006, the release supplied cash consideration for the fully paid shares; without it, the allotment would have left the appellant liable to pay their nominal value (paras 23–25, 48).

4. Possible exceptional consequences of insolvency procedures did not displace the statutory construction. The court acknowledged that cases might arise in which relief appeared appropriate but the requirement of subsisting liability prevented a claim. It did not determine entitlement under particular insolvency procedures (paras 36–38).

5. Section 253(4), concerning guarantors, was consistent with continuing legal liability. Subject to the guarantee's terms, payment discharging the borrower's liability to the lender entitled the guarantor to indemnity and subrogation. An amount could therefore remain legally due from the borrower to the guarantor and be irrecoverable (paras 39–41).

6. The court left open whether accepting property in full satisfaction of a larger debt triggered clawback under section 253(9) by reference to the debt discharged rather than the property's market value. HMRC's construction was plausible, but departed from the parties' earlier common ground and required no decision. Section 251(3) did not materially assist the appellant (paras 42–46).

• Court of Appeal (Civil Division): [2026] EWCA Civ 1331 . Unanimously dismissed the taxpayer's appeal and upheld the Upper Tribunal's refusal of relief.
• Upper Tribunal (Tax and Chancery Chamber): [2025] UKUT 00096 (TCC), decision dated 19 March 2025. Allowed HMRC's appeal and reversed the First-tier Tribunal.
• First-tier Tribunal: Decision dated 27 March 2024. Allowed the taxpayer's appeal against HMRC's refusal of trading-loan relief.
• HMRC: Refused the claim on 1 September 2022.