In S Hackett and another v HMRC [2024] UKFTT 749 (TC) (15 August) the FTT rejected the taxpayer’s assertion that compensation for misselling of interest rate hedging products was not taxable holding that it related to the profits of the property business.
Two brothers Simon and Edward Hackett ran a property rental business claiming deduction for interest paid. Interest arose from a missold hedging product for which the brothers later received compensation and interest on the compensation.
HMRC having opened an enquiry issued closure notices on the basis that the basic redress compensation receipts were taxable as income from a property business (ITTOIA 2005 s 268 271–272) and interest on the compensation was taxable as interest (ITTOIA 2005 s 369).
The brothers considered that the interest and basic redress were not taxable. They argued that the receipts represented the opportunity cost of losing the ability...
