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Payment under guarantee was allowable as the company had commenced trading

By Mark McLaughlin, November 2019

A guarantee payment to a bank made by an individual in respect of the debt of an unsuccessful company was allowable for capital loss relief purposes, as the company had engaged in commercial activities when it incurred a financial risk. 
 
A company (A Ltd) was incorporated on 17 May 2007. Its aim was to launch an alternative to the National Lottery. Shortly afterwards, A Ltd undertook a share exchange agreement with NHS Lotteries Limited, under which NHS Lotteries Limited (which had developed the concept of a ‘Health Lottery’) became part of the A Ltd group.  
 
On 9 July 2007, the appellant subscribed for 2,200 shares in A Ltd (a 22% shareholding), having (through his nominee corporation) instructed Credit Suisse on 27 June 2007 to provide a bank guarantee in relation to a loan facility of £17.5 million in favour of A Ltd. On 1 September 2009, the bank wrote to A Ltd demanding repayment

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