The capital balance
What amount genuinely stood to each owner’s credit immediately before the transaction, and how is it reconciled to historic accounts, bank records, realised profits, capital introduced, drawings and losses?
The essential starting point
CAR is not a tax relief and a director’s loan is not created by a label
CAR stands for Capital Account Restructure. It describes a documented sequence used alongside an incorporation where business owners have a genuine positive balance standing to their credit but the corresponding value is embedded in the business rather than sitting as spare cash.
The intended purpose was to release that existing capital immediately before incorporation and, where the owners chose, to lend corresponding funds to the new company so that the company remained adequately financed. CAR does not itself confer Incorporation Relief, make borrowing interest deductible or turn an unsupported bookkeeping entry into a genuine company debt; each conclusion must follow from its own facts and legal rules.
The financing and flow of funds
Did an independent lender create a real liability on stated terms, did the money move through the documented accounts, and were the withdrawal, NewCo loan and repayment recorded consistently?
The incorporation
Was a qualifying business transferred as a going concern with the whole of its relevant assets in consideration wholly or partly for shares, and was any required Section 162 claim made?
The company debt
Did the owners make a genuine, separately identifiable loan to NewCo which the company accepted and recorded, so that later payments reduce principal rather than constitute salary or dividends?
The questions interact, but they are not interchangeable. A positive capital account does not by itself prove that interest on substitute borrowing is deductible. A director’s loan ledger does not prove that cash was lent. A genuine loan to NewCo does not cure a failure to satisfy Section 162, and the fact that several steps were completed on the same day does not dispense with the need to establish their legal order and real economic effect.
Commercial rationale
The business decision should come before the capital-account mechanism
A responsible process begins with the objectives identified by the property business owners. Professional input should test, quantify and document whether their chosen direction is workable; it should not manufacture a reason to incorporate or a capital balance that the records do not support.
The company is a business vehicle, not the objective in itself
The Office of Tax Simplification recorded that advisers and professional bodies commonly identified non-tax drivers for incorporation including limited liability, access to and ring-fencing of finance, control over when income is drawn, reinvestment of profits and flexibility for succession through shares.
Those motivations remain client-specific. A company can also bring additional compliance costs, financing constraints, creditor duties and a second layer of personal tax when profits are extracted, so the commercial modelling must consider both advantages and disadvantages.
Accumulated capital can otherwise become represented only in shares
Established owners may have left deposits, further injections and realised profits in the unincorporated business for many years. If that value passes into the company solely as part of the net assets exchanged for shares, later access may require dividends, remuneration, a share transaction or liquidation, even though the value originated before incorporation.
CAR was designed to preserve a separate debt claim against the company, giving the owners flexibility to leave the money invested, receive principal repayments as company cashflow permits, or use it for retirement, deleveraging or other personally chosen purposes.
The Tribunal record
The commercial purpose was examined in public
At paragraphs 184 and 185 of the 2026 judgment, the First-tier Tribunal recorded that leading professional commentary treated the release of capital before or on incorporation as usual practice to prevent it becoming locked into share value. It then found nothing unusual or contrived in short-term independent funding used to finance the new company through directors’ loans for the commercial purpose of preserving ready access to capital previously provided to the business.
The witness evidence also illustrated why owners made different choices. Some wished to reduce long-term mortgage exposure before retirement, some wanted working-capital flexibility without forcing the company to raise larger mortgages immediately, and one witness estimated that a conventional long-term refinancing route would have added approximately £250,000 of fees. Those findings explain the commercial problem CAR addressed; they do not remove the need to verify each client’s balance, documents and tax position.
Accounting foundation
What a positive capital account is, and what it is not
A positive balance is an amount supported by the unincorporated business records as standing to an owner’s credit. Depending on the accounting system and partnership agreement, it may appear in a fixed capital account, current account, drawings account or a combined proprietor’s account; the heading is less important than the legal and economic substance of the entries.
Simplified reconciliation
Capital introducedRealised retained profitsOther valid creditsDrawings and lossesSupported credit balance
This is an explanatory framework, not an accounting formula that can be applied without the historic records, ownership terms and an owner-by-owner reconciliation.
What the records may legitimately show
- cash and other assets genuinely introduced by the owner into the business;
- deposits and acquisition funding originally supplied personally;
- further capital injections made during the life of the business;
- realised, taxed profits left undrawn and credited to the owner;
- other properly evidenced credits under the partnership or ownership terms;
- less drawings, allocated losses and previous repayments.
What must not be treated as ready capital automatically
- an increase in the market value of rental properties or other unrealised gains;
- a revaluation reserve created shortly before incorporation;
- a balancing figure inserted only to match the proposed facility;
- the same contribution being credited to more than one owner;
- an amount derived simply from portfolio equity or loan-to-value;
- a journal entry unsupported by source documents and ownership rights.
HMRC’s current BIM45710 expressly distinguishes accumulated realised profits from unrealised profits and says that a revaluation of business assets, including property, should be disregarded when considering the proprietor’s account. HMRC’s partnership guidance also distinguishes permanent capital from current-account items and makes clear that labels alone do not determine the nature of a balance.
Where historic accounts are incomplete, an accountant may need to reconstruct the position from acquisition statements, bank records, tax returns, partnership allocations, refinancing documents and drawings. That exercise should identify uncertainties openly rather than treating an exact-looking number as proof.
Documented sequence
How CAR is intended to operate
The following is an explanatory map of the legal and cash steps recorded in the public judgment. It is not a substitute for the executed facility, ledgers, bank or client-account statements, company records and incorporation documents for the particular case.
Verify the owner-by-owner balance
The accountant reconciles the positive balance immediately before completion. The amount selected for CAR cannot exceed the amount properly available to withdraw.
Document genuine short-term finance
A real facility is entered into with an independent lender on stated terms, including the borrowers, company liability, facility amount, commercial fees and repayment obligation.
Release capital before the transfer
The unincorporated business records a withdrawal against each owner’s supported credit balance. The legal and accounting order matters even where the steps occur on one day.
Owners lend funds to NewCo
The owners make a corresponding loan to the new company. NewCo accepts the loan and credits a director’s or shareholder’s loan account in the correct proportions.
Complete the business incorporation
The business and relevant assets and liabilities transfer under the incorporation documents. The consideration for the transferred business must be analysed separately from the NewCo loan.
Discharge the short-term facility
Under the CAR documents described by the Tribunal, NewCo uses the NewCo loan to repay the bridging lender and is left owing the corresponding principal to the owners.
Record the resulting company debt
The company’s opening records, loan ledgers and subsequent accounts show the genuine amount owed. Later principal repayments reduce that debt as cashflow and directors’ duties permit.
The critical ordering
Before incorporation and after incorporation are not interchangeable
Before incorporation
The unincorporated owners must possess the supported right to withdraw the capital, the facility must create a real liability and the withdrawal must be recorded against their balances before the business transfer takes effect.
At and after incorporation
NewCo must receive and accept a separate loan, the business transfer consideration must remain correctly identified, the facility must be discharged as documented, and the company’s records must continue to reflect the resulting debt accurately.
Evidence, not labels
The documents must tell one coherent story
CAR is a coordinated set of accounting, finance, company and incorporation steps. The capital-account figure, facility agreement, withdrawal entries, company loan records and flow of funds must describe the same transaction without contradiction.
Capital-account reconciliation
Historic accounts, tax computations, partnership allocations, source documents, drawings, losses and an owner-by-owner bridge to the completion date.
Facility and lender evidence
An executed facility, lender identity and capacity, amount, fees, repayment terms, liability provisions and evidence that the lender made real funds available.
Business authorisations and ledgers
The authority for each withdrawal, entries in the unincorporated books and evidence that no owner’s account was debited beyond the amount supportable.
Shareholder or director’s loan
Written loan terms where appropriate, board acceptance, opening ledger, allocation between lenders and continuing reconciliation in annual accounts.
Primary transfer documents
The sale and purchase agreement, trust or conveyancing documents, agency terms, liabilities schedule, shares issued and completion statement.
Flow-of-funds pack
Bank, solicitor or client-account statements cross-referenced to journals and ledgers, showing every movement and the discharge of the short-term facility.
| Participant | Primary responsibility | Evidence expected |
|---|---|---|
| Business owners | Identify their commercial objectives, provide complete records and choose between the available routes. | Signed fact find, objectives, instructions, confirmations and explanations of historic funding. |
| Accountant or tax adviser | Reconcile the balances, test the business and Section 162 conditions, and prepare the tax/accounting treatment. | Working papers, owner-by-owner reconciliation, opening balance sheet, relief computation, claim and disclosures. |
| Legal adviser | Draft or review the facility, company loan and business-transfer documents and explain the legal rights and liabilities. | Executed agreements, completion record, board/share documents and confirmation of legal sequencing. |
| Lender and administrator | Provide the facility on agreed commercial terms and maintain the independent flow-of-funds evidence. | Facility offer, KYC, statements, fee invoices, repayment and discharge evidence. |
| NewCo directors | Accept the loan, authorise the relevant payments and maintain accurate company records while observing their duties. | Board minutes, loan ledger, bank entries, statutory records and annual accounts. |
Client-led does not mean professionally untested. The owners decide what commercial outcome they want; the accountant, legal adviser and other specialists must independently validate the part within their competence, identify any disagreement and refuse to assume a fact simply because another document uses the desired label.
Separate professional questions
The accounting, interest, company-loan and CGT analyses must not be collapsed into one
CAR can be economically coherent while still requiring a separate answer under each relevant provision. The conclusion on one issue is evidence for context, not a substitute for the legal test governing another.
Was value genuinely available to the owners?
The owners must have possessed an enforceable and properly recorded entitlement under the unincorporated business arrangements. A credit balance may include realised retained profits and capital introduced, but it cannot be inferred merely from portfolio equity or an asset revaluation.
The accountant should reconcile the balance to each owner and explain any distinction between fixed capital, current accounts, undrawn profits and other entries.
Capital-account capacity and loan-purpose are related but distinct
HMRC’s current BIM45700 and BIM45705 require consideration of what the borrowed money was used for and whether the wholly and exclusively test is met. The fact that an account remains in credit is not, by itself, conclusive that interest is deductible.
Any Income Tax interest analysis must therefore identify the purpose and use of the facility at the time it was obtained, rather than assume the answer from the capital balance alone. Corporation Tax follows separate loan-relationship rules.
A genuine director’s loan is a company liability
Where owners lend money to NewCo, the company should record the principal it owes them. Repayment of genuine principal is ordinarily a reduction of that debt rather than salary or a dividend, but the balance must exist and remain accurately recorded.
Interest charged by an owner is a different item: GOV.UK states that it is personal income for the lender and that the company must generally deduct basic-rate Income Tax and account for it using CT61.
ESC D32 and the transferred liability
HMRC CG65745 says business liabilities taken over by a company are strictly additional consideration but may be ignored for Section 162 purposes under ESC D32. It also says this is normally achieved by the company giving the transferor an indemnity.
The review must identify the facility obligation, the legal mechanism by which NewCo became liable, whether it was genuinely a business liability and whether the concession is relevant. Personal liabilities do not qualify.
Purposive legal analysis
Planned steps are tested by their legal and commercial effect
The Ramsay line of authority requires tax legislation to be construed purposively and the facts to be analysed in that light. MacNiven v Westmoreland Investments also emphasises the need to identify the statutory concept being used and whether it carries a legal or commercial meaning. A pre-planned sequence is not ignored merely because it was pre-planned, but labels will not rescue steps that lack the rights, obligations or real-world economic effects required by the legislation.
For CAR, this means examining the genuine capital entitlement, real facility liability, actual lending to NewCo, business transfer and resulting company debt as a coherent transaction, while still applying the precise statutory test to each component.
The published record
What HMRC published when CAR was developed—and what changed in 2026
The CAR arrangements considered in the public judgment were developed and implemented while HMRC’s former BIM45700 was publicly available. That guidance expressly applied to property businesses and used detailed figures to distinguish the withdrawal of genuine capital from borrowing that financed drawings beyond the owner’s available capital and realised profits. HMRC amended BIM45690, BIM45700 and related pages on 1 July 2026, so a facts-based review must identify both versions, the statutory test and the evidence for the particular transaction.
Archived BIM45700
The archived page, shown as updated on 21 July 2020, said a proprietor could withdraw profits and capital introduced even where substitute interest-bearing finance was then required, subject to restriction where drawings exceeded the available capital and profits.
The OTS preserved the example
The Office of Tax Simplification reproduced HMRC’s Mr A property example and said it showed that interest on borrowing used to permit a capital withdrawal could qualify where the capital account did not become overdrawn. It recommended clearer and more consistent guidance.
HMRC changed the examples
HMRC’s update record describes the BIM45690 and BIM45700 amendments as providing clearer context and removing unnecessary numerical calculations. The current pages place greater emphasis on the purpose and use of the borrowing.
Questions put to HMRC
Property118 asked HMRC to identify the legislation or judicial authority supporting the revised interpretation and to explain how earlier transactions would be treated. HMRC acknowledged the correspondence, shared it with relevant colleagues and declined to answer the specific points directly.
The comparison accountants need to see
Mr A and Mrs H: similar private destinations, different published outcomes
The examples cannot simply be treated as factually identical because the current Mrs H example omits the valuation and capital-account figures needed for a full comparison. The contrast is nevertheless material: the earlier example examined what the borrowing replaced within the business, while the current example gives greater weight to the immediate private use of the released money.
Mr A: London to Rotterdam
- HMRC disclosed the property value, existing mortgage, opening capital account, new borrowing and closing capital account.
- The £125,000 released was used to buy a private home in Rotterdam.
- HMRC allowed the interest in full because the borrowing remained within the funding represented by the property and the capital account was not overdrawn.
Mrs H: London to Paris
- The current example gives no property value, opening capital balance, amount originally introduced or closing balance.
- The additional mortgage money is used to buy a private home in Paris.
- HMRC denies the interest because the released funds are used to acquire a private asset.
Capital withdrawal was not an unlimited rule
The archived guidance distinguished between finance replacing genuine owner funding and borrowing that supported drawings beyond the owner’s capital and accumulated realised profits. Its third example restricted interest where the proprietor’s account became overdrawn, and it made clear that a property revaluation did not change that result.
That distinction remains central to CAR: a positive figure must be reconstructed from real contributions, realised profits, losses and drawings. Portfolio equity or an unrealised revaluation does not by itself establish capital capable of withdrawal.
Purpose, use and available capital all remain relevant
Current BIM45700 says that “simply exchanging existing capital for loan finance” does not by itself satisfy section 34. Its third example nevertheless says the enquiry should consider the purpose or purposes when the funding was obtained and the amounts that could have been withdrawn without the loan.
BIM45705 adds that neither an overdrawn nor a credit capital account is conclusive. HMRC’s own BIM45665 records the Scorer v Olin principle that loan purpose is a factual question and cannot necessarily be determined solely from the money’s immediate use.
Date clarification: the current Business Income Manual displays 4 August 2026 as its latest overall update date, but HMRC’s detailed update record dates the relevant BIM45690 and BIM45700 amendments to 1 July 2026. The 4 August entry concerns a different employee share schemes page.
What this means for CAR
Historic guidance is important evidence, but it is not statutory clearance
The archived BIM45700 is strong contemporaneous evidence of HMRC’s published interpretation when CAR was developed. That position is independently preserved by the OTS report and recorded in the public Tribunal judgment. It helps explain the professional and commercial context in which the capital-account mechanism was considered.
It does not mean that HMRC formally approved every CAR transaction, that a credit balance automatically made all interest deductible, or that BIM45700 itself determined Section 162 relief. The statutory Income Tax question remains section 34 ITTOIA 2005, while the incorporation and company-loan questions arise under different rules.
The 1 July 2026 manual amendment did not rewrite the documents already executed or amend section 34. Historic transactions should therefore be analysed on their actual facts, funding history, records, law and contemporaneous guidance. Current guidance must also be addressed where interest deductions continue, an enquiry is open or a new transaction is being considered.
Property118 analysis and correspondence
The open letter asks the question the revised manual does not answer
Property118’s open letter compares Mr A with Mrs H, distinguishes the return of genuine capital from borrowing beyond the owner’s available balance, and asks HMRC to identify the statutory or judicial basis for the revised approach and its intended treatment of historic refinancing.
HMRC’s response of 28 July 2026 acknowledged the correspondence and said it had been shared with relevant colleagues, but HMRC would not comment directly on the specific points raised. The open letter is Property118’s analysis rather than a source of law; the archived manual, current manual, update history, OTS report, legislation and judgment provide the external evidential record.
Incorporation Relief
CAR must be tested within the incorporation, not in isolation
Section 162 is the statutory incorporation relief; CAR is not. An individual case must establish both the incorporation conditions and the separate legal and accounting consequences of the capital restructure.
A business
The activities transferred must amount to a business for Section 162 purposes on the facts of that owner or partnership.
As a going concern
The business must be operating at transfer and the pre-transfer steps must not prevent NewCo from carrying it on without interruption as it wishes.
The whole assets
All business assets must transfer, except that cash and sums in bank deposit or current accounts may be excluded. HMRC says pre-transfer withdrawals remain a factual question.
Shares and claim
The transfer consideration must be satisfied wholly or partly by shares. For disposals on or after 6 April 2026, HMRC states that a satisfactory claim is required.
Why a capital withdrawal needs its own analysis
Section 162 permits cash to be left out of the transfer, but HMRC CG65710 says it is a question of fact whether assets removed from the balance sheet before transfer should still be regarded as part of the whole assets of the business. The timing, entitlement and purpose of the withdrawal must therefore be evidenced.
The accountant should also confirm that the withdrawal did not leave the business unable to continue as a going concern and that the amount did not include unrealised property gains.
The facility and ESC D32 must be identified accurately
The short-term facility is not the same thing as the owners’ subsequent NewCo loan. The documents must show who owed the lender, how NewCo became liable, how the facility was discharged and whether the obligation was a business liability capable of falling within ESC D32.
This is separate from the treatment of existing property mortgages under the SIS documents, even though both categories may appear in the wider incorporation balance sheet.
The critical boundary
Shares pay for the business; a separate genuine loan funds the company
Under the intended CAR documentation, the consideration for the transferred business remained the shares issued under the sale agreement. The director’s or shareholder’s loan arose because the owners separately lent funds to NewCo. If the documents or accounts instead show that the loan balance was consideration for the business transfer, non-share consideration may restrict Section 162 relief.
The public court record
What the 2026 DOTAS judgment decided—and its limits
The First-tier Tribunal’s decision is important evidence about the CAR documents, client motivations, financing and real-world implementation. It must nevertheless be read within the disclosure issue the Tribunal was asked to decide.
What the Tribunal decided or recorded
- The appeals were allowed and HMRC’s decisions to issue the SIS and CAR Scheme Reference Numbers were cancelled.
- The Tribunal recorded CAR as the four-document SIS structure together with the Facility Agreement and related bridging-loan arrangements.
- It concluded that obtaining the CAR tax benefits was a main purpose but not the main purpose of the overall CAR arrangements, taking account of other tax and non-tax reasons for incorporating.
- It found that at least some users would have entered CAR for non-tax benefits regardless of whether one or more expected tax advantages was available.
- It recorded that leading commentary treated the release of capital before or on incorporation as usual, and found nothing unusual or contrived in the independent short-term funding and NewCo loans used for the stated commercial purpose.
What the Tribunal did not decide
- It did not determine every client’s entitlement to Section 162 Incorporation Relief or the validity of every claim.
- It did not certify the amount of every client’s positive capital account or exclude the need for an owner-by-owner reconciliation.
- It did not determine whether interest on the short-term or replacement borrowing was deductible in every case.
- It did not validate every director’s loan balance, accounting entry, facility obligation or flow of funds.
- It did not prevent HMRC or a professional adviser from examining an individual transaction on its own documents and facts.
The correct description is therefore precise: the Tribunal rejected HMRC’s DOTAS case and made substantive findings about CAR’s commerciality and implementation. It did not replace the individual tax analysis that each client and accountant still require.
Individual review
The evidence a CAR review should contain
A useful report should not merely repeat the structure. It should show the evidence obtained, the professional responsible for each conclusion, the assumptions that remain unverified and the consequence if any step is unsupported.
| Issue | Minimum evidence | Conclusion required |
|---|---|---|
| Commercial decision | Client fact find, objectives, alternatives and modelling | Why incorporation and capital access were commercially chosen by these owners |
| Business and going concern | Activity records, management evidence, accounts and continuity plan | Whether a qualifying operating business transferred |
| Capital balance | Owner-by-owner reconciliation to historic accounts and source documents | The genuine amount available before completion |
| Unrealised amounts | Valuation reserves and revaluation journals separately identified | That market equity and unrealised gains were excluded where required |
| Facility | Executed agreement, lender identity, source, amount, fee and repayment terms | A real external liability on commercial terms |
| Capital withdrawal | Authority, banking or client-account statement and unincorporated ledger | A genuine pre-transfer withdrawal against the correct balances |
| Loan to NewCo | Loan terms, board acceptance, payment evidence and opening loan account | A separate company debt rather than transfer consideration |
| Business transfer | SPA and SIS documents, assets, liabilities, shares and completion statement | Section 162 conditions and consideration |
| Liability treatment | Indemnity, novation or joint obligation, repayment and discharge | Whether ESC D32 is relevant and whether the liability was a business liability |
| Flow of funds | Complete statements and ledgers with every step cross-referenced | That the transaction occurred as documented |
| Post-completion accounts | Company balance sheet, loan-account movements and annual accounts | Continuing consistency between law, cash and accounting |
| Tax reporting | Section 162 calculation and claim where required, returns and disclosures | The final tax treatment and filing position |
Red flag: where the capital figure, facility amount, withdrawal and opening company-loan balance all match but there is no historic owner-by-owner reconciliation, the numerical symmetry does not prove the capital existed. It identifies the point requiring the most careful verification.
Frequently asked questions
Direct answers, with the necessary qualifications
What does CAR stand for?
CAR stands for Capital Account Restructure. It is the name given to the capital-release and short-term financing sequence used alongside the wider incorporation documents.
Is CAR simply another name for a director’s loan account?
No. A director’s or shareholder’s loan account is the resulting company accounting record where the owners have genuinely lent money to NewCo. CAR describes the wider sequence intended to release supported capital before incorporation and create that separate loan through real transactions.
Why not simply credit the old capital account to a company loan account on incorporation?
Because a loan balance created as consideration for the transferred business may be non-share consideration and can restrict Section 162 relief. The intended CAR route separated the share consideration for the business from the owners’ independent loan of funds to NewCo. The documents and cash evidence must support that distinction.
Can an increase in property value create the capital balance used for CAR?
Not merely because the portfolio is worth more. HMRC BIM45710 says unrealised profits and asset revaluations should be disregarded when considering a proprietor’s account. The balance must be reconciled to realised profits, capital introduced and other genuine credits, less drawings and losses.
Did the owners have to receive the money into their everyday bank account?
Not necessarily. The Tribunal recognised that mainstream financing transactions often use solicitor, escrow or controlled client accounts and the borrower may never have unrestricted physical possession of the cash. What matters is whether the facility, legal entitlements, payment instructions, account statements and ledgers establish real fund movements and obligations.
Does completing the steps on the same day make them artificial?
No automatic rule says so. The Tribunal found nothing unusual or contrived in the short-term facility and company-loan steps, including the controlled funds and very short duration. The speed of completion nevertheless increases the importance of a clear documentary sequence and independent evidence.
Are repayments of a CAR director’s loan always tax-free?
Repayment of genuine loan principal is ordinarily a reduction of the company’s debt rather than salary or a dividend. That answer depends on the balance being real and correctly recorded. Interest, an overdrawn account, a waiver, a distribution or a payment exceeding the principal raises separate tax and company-law questions.
Did the DOTAS judgment prove that every CAR client qualifies for Section 162 relief?
No. It cancelled the Scheme Reference Numbers and made important findings about the arrangements and their commerciality, but it was not an omnibus determination of every user’s capital balance, business status, documents, liability treatment or individual entitlement to Incorporation Relief.
Does HMRC’s 1 July 2026 amendment to BIM45700 invalidate historic CAR transactions?
No. It does not automatically invalidate an earlier transaction. HMRC manuals are guidance rather than legislation, and an amendment does not rewrite executed documents or historic facts. HMRC may nevertheless contend that its revised wording reflects the correct interpretation of section 34, so the proper analysis must address the statute, purpose and use of the borrowing, the owner-by-owner capital history, the contemporaneous guidance and any continuing interest deductions.
Could the same approach be recommended for a new incorporation today?
Only after current, case-specific legal, tax, accounting and finance analysis. This page explains historic CAR and the relevant evidence; it is not a recommendation to reproduce the transaction. Current Section 162 claim requirements, HMRC guidance, lender terms, company law and the client’s commercial alternatives all need to be assessed afresh.
Evidence base
Primary and supporting sources
The page links directly to legislation, HMRC’s archived and current guidance, HMRC’s amendment history, the official 2026 judgment, the OTS review and supporting professional material. Property118’s open letter is identified separately as analysis and correspondence rather than external authority.
BIM45700 captured 4 August 2020
The contemporaneous HMRC page applying to property businesses, including the detailed Mr A example and the former capital-withdrawal wording.
Section 34 ITTOIA 2005
The wholly and exclusively rule governing deductions in calculating trade and property-business profits.
Business Income Manual updates
The official record dating the relevant BIM45690 and BIM45700 amendments to 1 July 2026 and describing their purpose.
Open letter to HMRC
Property118’s comparison of the former and current examples, the questions put to HMRC and HMRC’s published acknowledgement of 28 July 2026.
BIM45665 and Scorer v Olin
HMRC’s statement that loan purpose is a question of fact and cannot necessarily be established solely from the immediate use of the money.
Property 118 Limited & Anor v HMRC
The official First-tier Tribunal decision, including the CAR documents, witness evidence, conclusions and cancellation of the SRNs.
Section 162 TCGA 1992
The statutory conditions governing Incorporation Relief.
CG65700 and CG65710
HMRC’s current introduction, conditions, whole-assets test and new claim requirement for transfers from 6 April 2026.
CG65745 and ESC D32
HMRC’s treatment of business liabilities transferred to a company, including indemnities and other consideration.
Current BIM45700, BIM45705 and BIM45710
HMRC’s current treatment of capital withdrawals, loan purpose, overdrawn accounts and unrealised revaluations following the 1 July 2026 amendments.
OTS Property Income Review
The official 2022 review reproducing the former BIM45700 wording and Mr A example, and recommending clearer and more consistent remortgaging guidance.
Director’s loans
Official overview of company-to-director and director-to-company balances and record-keeping requirements.
SAIM10320 and PM258200
Supporting material on capital, current and drawings accounts and the need to distinguish labels from the underlying balance.
MacNiven v Westmoreland Investments
House of Lords authority on purposive construction and the need to identify the legal or commercial meaning of the statutory concept.
UBS AG v HMRC
The Supreme Court’s modern explanation of the Ramsay purposive approach.
Simon’s Taxes
The subscription reference work whose B9.112 commentary was examined and recorded in the public Tribunal judgment.
Related Property118 explanations
CAR was used alongside the Substantial Incorporation Structure, so the mortgage, beneficial-ownership and Section 162 issues explained in the SIS guide remain relevant to the wider incorporation.
Property118 consultation
Start with the commercial objective, then verify the capital and the evidence
Property118’s process begins with the owners’ objectives, portfolio, financing, succession plans and historic business records. Where incorporation remains commercially sensible, the capital account, legal route and tax treatment must then be tested by the relevant professional advisers before any recommendation is implemented.