In Mr Benoit d’Angelin v HMRC [2024] TC09186, the First Tier Tribunal (FTT) dismissed the appeal on the grounds there was an extraction of value under the legislation on the Remittance Basis.

  • The appellant was resident in the UK, not UK-domiciled and taxable on the Remittance Basis.
  • In December 2016, he introduced £1.5m of foreign income to his wholly owned UK company, d’Angelin and Co Ltd (DAC) which he had founded and was the sole director. He invested in anticipation of qualifying for Business Investment Relief (BIR). 
  • BIR was claimed for 2016/17, the investment of foreign income was treated as not remitted to the UK and was not taxable.
  • Director’s loan account was created which he used to pay various items including personal expenses. The debit balance eventually reached £71,515.
  • In April 2018, DAC declared an interim dividend of £825,000 on each of its two shares. 
  • HMRC opened an enquiry into his 2017/18 tax return. His legal advisers told HMRC that his accountants had mistakenly failed to produce a P11D for 2017/18 and a copy was then provided.
  • After complaining of HMRC’s delay in responding to correspondence from November 2020, the appellant applied to the FTT for an order that HMRC close its enquiry. 
  • HMRC then issued a Closure Notice. They considered the director's loan account to constitute an ‘extraction of value’ contrary to the Remittance Basis. Together with the omission of employment benefits for 2017/18 they assessed Income Tax due of £675,307.
  • Mr d’Angelin Appealed against this decision. His key ground for appeal was that on a proper interpretation of the legislation the extraction of value rule was not breached because a receipt of value must mean a receipt of net value.
  • It was common ground that if the extraction rule was breached, the statutorily prescribed mitigation steps were not taken within the prescribed grace period.

The FTT’s findings:

  • The appellant had not used the relief for Tax avoidance and HMRC had not challenged on this basis.
  • Sometimes DAC paid expenses on behalf of the appellant but sometimes the appellant paid on behalf of DAC. Personal expenses were paid by DAC when its credit or debit cards were used, and the most significant of these were private travel costs.
  • Although the appellant had significant personal funds available, the loan was not paid off in full at any time. Equally, DAC could have paid a dividend at any time to clear the loan and the appellant was the decision maker throughout the relevant time.
  • The appellant's legal advice of December 2016 included a warning that “Any…use of company’s assets personally would be treated as an extraction of value and would breach the conditions of the [BIR] relief".
  • The appellant’s interpretation of ‘net value’ was not accepted as “it is doing violence to the statutory language in circumstances where it is not plain there has been a drafting mistake.”
  • The relevant legislation on BIR allows remittance basis taxpayers to make genuine commercial investments without a remittance occurring, subject to conditions to avoid abuse.
  • As a final test, the FTT considered the position under the Human Rights Act 1998 (HRA) Protocol 1, Article 1: Protection of property (A1P1) which protects individuals from arbitrary state interference with their possessions but recognises the state's right to control or expropriate property if it is in the public interest to do so and this is done in a proportionate manner.
  • They did not consider the interpretation given to the legislation by HMRC with which they agreed offended A1P1.

Concluding that there was an extraction of value within the proper meaning and effect of the legislation which was not with the exemption that might have been available, the FTT dismissed the appeal.  

Useful guides on this topic

Business Investment Relief
Business Investment Relief is a special relief for non-UK domiciled individuals designed to encourage them to remit funds to invest in UK businesses.

Non-Domicile & the Remittance Basis: At a glance
What is Domicile? Does it have tax advantages? What is the Remittance Basis. When does it apply for Non-Domiciled individuals?

Remittances: what is a remittance for the remittance basis rules?
What is a remittance in terms of the remittance basis of taxation, with practical examples.  What are the remittance matching rules?  What is clean capital?

Remittance basis (overseas income)
What is the remittance basis? Who can claim it and when? What are the advantages of claiming the remittance basis and how much is the remittance basis charge?

P11D: Reporting benefits and expenses
How do you report benefits and expenses? What is the P11D deadline?

Directors' loan accounts: Toolkit (subscribers)
HM Revenue & Customs (HMRC) have a director's loan accounts toolkit for advisers. This is our enhanced version with planning points.

Closure notices
When does HMRC issue a Closure Notice? Can a taxpayer demand one? Are there appeal rights?

External sources

Mr Benoit d’Angelin v HMRC [2024] UKFTT TC09186