Court of Appeal: released loan is not 'outstanding' for s.253 relief

The Court of Appeal has dismissed Timothy Bunting's appeal against HMRCNationalarchives, holding that a lender who releases an irrecoverable loan in exchange for shares of negligible value cannot claim loss relief under section 253 of the Taxation of Chargeable Gains Act 1992 ("the TCGA") for the released amountNationalarchives. Lord Justice Newey gave the unanimous judgment, handed down on 16 October 2026, upholding the Upper Tribunal's reversal of the First-tier Tribunal ("the FTT").

Mr Bunting had lent £3,452,771 by the end of 2010 by way of unsecured, interest-free loans to fund the trade of Rectory Sports Limited (known as Sportspages UK Limited). On 31 January 2013 he capitalised £2,200,000 of the loanNationalarchives: the company allotted him 2.2 million £1 shares, fully paid, for his full release of that indebtednessNationalarchives. On 18 March 2013 the company transferred assets including its name and stock to him for the release of a further £1,325,771. The company and the shares had no market value, and on 28 March 2013 the company went into members' voluntary liquidation. HMRC refused the section 253 claim in September 2022; the FTT allowed his appeal, and the Upper Tribunal reversed that decision in March 2025.

The appeal turned on the meaning of "outstanding" in section 253(3)(a) of the TCGANationalarchives, which grants relief where "any outstanding amount of the principal of the loan has become irrecoverable" at the time of the claimNationalarchives. The court held that "outstanding" means remaining legally due — a continuing legal entitlement to pursue the amount — and not merely unpaidNationalarchives. Once Mr Bunting released the £2,200,000, that part of the loan was extinguished and was no longer outstanding when he claimedNationalarchives, even though he received nothing of economic value for it.

First, the phrase "amount of the principal of the loan" points to continuing indebtedness: it would be odd to say "I have released the loan but it remains outstanding". Secondly, the surrounding provisions assume a subsisting right of recovery — section 253(3)(b) requires the claimant not to have assigned "his right to recover that amount", and subsections (5) and (9) deal with recovery "in satisfaction of his right to recover that amount". Thirdly, the release was the cash consideration that paid up the sharesNationalarchives: under section 583 of the Companies Act 2006 a release of a liability for a liquidated sum counts as payment in cash, without which the shares could not have been allotted without breaching the prohibition on issuing shares at a discount. The negligible market value of the shares was irrelevant.

The insolvency objections failed. A dissolved borrower's debt ceases to exist, but the court noted that lenders will usually know enough to claim before dissolution, may be able to apply to restore a dissolved company to the register, or can specify an earlier time for the claim under section 253(3A) of the TCGA. Nor did the guarantor provision in section 253(4) assist: where a guarantor pays the lender and discharges the borrower, the guarantor steps into the lender's shoes by indemnity and subrogation, so an amount legally due from the borrower to the guarantor remains. Crosby v Broadhurst [2004] SpC 416, on which the FTT had relied, was disapproved insofar as it held that a loan need not be both subsisting and irrecoverable. Subject to section 253(3A), a claim that could validly have been made on 30 January 2013 could not be made after the capitalisation on 31 January 2013Nationalarchives.

Legal basis: section 253(3)(a) of the Taxation of Chargeable Gains Act 1992; sections 580 and 583 of the Companies Act 2006.