Hexagon Properties Ltd v HMRC

In Hexagon Properties Ltd v HMRC [2022] UKFTT 137 (TC) (14 April 2022) the FTT held that the release of £3.5m of debt owed by the company to a bank was not taxable under the loan relationship provisions. The release was part of the settlement of a damages claim brought by the company against the bank.

In 2007 Hexagon borrowed £5m from a bank to refinance its existing debt and to finance property developments. At the same time the company bought an interest rate hedging product (IRHP) from the bank. Following the financial crash the effect of the product was to lock the company into artificially high effective interest rates with the result that its credit rating was affected and it was unable to complete the developments. The company’s business was further damaged when the bank appointed receivers and sold some of its properties. The...