Redress payments arising from a swap arrangement relating to the interest rate on a loan were taxable and penalties for inaccuracies in the appellants’ tax returns were upheld. 

The appellants entered into a loan from Barclays to acquire a property, which was to be used by a company (of which they were the sole shareholders) that conducted a telecoms business. Between exchange and completion of the property transaction, Barclays encouraged them to also enter into a swap arrangement relating to the interest rate on the loan.  

Subsequently, the appellants participated in an independent review process regarding interest rate hedging product mis-selling, which had been set up by (what is now) the Financial Conduct Authority. In May 2014, Barclays made an offer to the appellants of £443,592, which the appellants accepted. The funds were paid (after deduction of income tax from the interest element of the redress payment) to the