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Charitable company’s payments were loan repayments and not non-charitable expenditure

By Mark McLaughlin, May 2026

Payments by a charitable company were repayments of a loan it owed and were not non-charitable expenditure for which a corporation tax charge arose.

In its accounting period ended 30 June 1988, the appellant charitable company (N) obtained a bank loan (from Citibank) of £11,630,967. N’s accounts recorded a bank loan secured on the company’s investment in listed shares. Since at least 11 August 1989, N had granted a fixed charge over shareholdings to a Citibank entity, and on 22 March 1990, granted a floating charge over its other assets. On 18 December 1989, a company (J) guaranteed Citibank in respect of the Citibank loan. On 3 July 1990, Citibank demanded immediate repayment of £11,731,742. N’s 1990 and 1991 accounts recorded that the investments were disposed of and that the shortfall arising on the loan was settled by third party guarantors. J guaranteed N’s indebtedness to Citibank and satisfied the shortfall. J thereby

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