Primeur, Part One: ‘control’ for loan relationship purposes

The First-tier Tribunal (‘FTT’) case of James Keighley and Primeur Ltd v HMRC [2024] UKFTT 30 (TC) covers a number of disparate issues.  The one we focus on in this note concerns losses on loans made by Primeur Ltd (‘Primeur’) to an associated company called Valley Dale Properties Ltd (‘VDP’).

Primeur had lent VDP some £476,000, secured by a legal charge over VDP’s property.  It was also owed some £133,000 (apparently unsecured) described as a ‘trading balance’.  VDP got into financial difficulties and Primeur didn’t get all its money back.  It claimed relief for the loss, under the ‘loan relationship’ rules.  HMRC objected.

The rules don’t allow tax relief for a loss on a debt if the lender and borrower are ‘connected’.  Two companies are ‘connected’ if the same person (or persons) ‘control’ each of them.  You have ‘control’ of a company if you have the power to secure (by reason of holding shares, voting power, or other powers conferred by any document regulating the company) that the affairs of the company are conducted in accordance with your wishes.

Mr Keighley and a Mr Minal held a majority of the shares and votes in each company.  At first blush, therefore, the companies were ‘connected’ and no relief was available for the loss.

However, that wasn’t the full story.  A third person, Mr Fearnley, also held shares in Primeur (but not in VDP).  And there was a shareholders’ agreement which provided a list of things which could be done only with Mr Fearnley’s consent.  These things included changing the constitution of the company or its name, issuing debt instruments, forming subsidiaries, merging or winding up the business, changing the nature of the business carried on by the company, making loans, permitting transactions with associated companies or shareholders, and other similar provisions.

As the FTT put it: ‘These matters are fundamental to the running of the company at both an operational and strategic level. They are clearly within the ambit of the affairs of the company. Since the majority shareholders do not have the power to secure that these are conducted in accordance with their wishes, it is our view that they do not have control of the company.’  The companies were not, therefore, ‘connected’ for the purpose of the loan relationship rules.

It’s important to appreciate the limitations of the decision.  The FTT rejected the submission that ‘in order to control the company, a person must be able to secure that every single one of the affairs of the company are conducted in accordance with that person’s wishes.’  No: it is a question of degree: a provision in a shareholders’ agreement preventing the company from buying ‘more than 50 paperclips in one batch’ would not mean that the majority shareholders did not control the company.  The FTT said: ‘There must be a consideration in each particular case, which is bound to be fact dependent, as to whether the specific activities of the company in question are conducted in accordance with a person’s wishes. And, without making any hard and fast rule (which we do not need to do in this case) the relevant affairs and activities of the company which need to be considered will vary on a case-by-case basis.’

In this case, the scope of the shareholders’ agreement was so broad as to mean that the majority shareholders did not effectually control the company.  Relief was not denied by the ‘connectedness’ rule.

Nonetheless, the FTT held, for other reasons, that Primeur was not entitled to the tax relief which it had claimed.  Why?  Watch this space for the next briefing on this interesting and multi-faceted case.

For more information on business tax and the loan relationship rules, please get in touch with your usual BKL contact or use our enquiry form.



Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.


Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.


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