HMRC succeed in share loss relief appeal
In Roger Murphy v HMRC [2025] UKUT 00165 (TCC), the Upper Tribunal has confirmed that claims for share loss relief made under section 574 of the Income and Corporation Tax Act 1988 are governed by Schedule 1B of the Taxes Management Act 1970 and hence are claims “made outside of a return” for that purpose. The Upper Tribunal upheld the decision of the First-tier Tribunal that HMRC had properly enquired into the claim by commencing an enquiry into the taxpayer’s return for 2006/07, the year in which the loss was incurred, rather than 2005/06, the year to which that loss was carried back.
The Upper Tribunal also allowed HMRC’s cross-appeal on the ground that the taxpayer had not forced the claim into his tax return for 2005/06 where the claim did not affect the taxpayer’s self-assessment of the tax due for that year. It is only where information provided in a tax return which is taken into account by the taxpayer in performing their self-assessment that a claim has been made “in” a return (per HMRC v Cotter [2013] UKSC 69). The decision of the Court of Appeal in R (Derry) v HMRC [2017] EWCA Civ 435 and the obiter comments of the Supreme Court in R (Derry) v HMRC [2019] UKSC 19 are not binding and the FTT should have determined that issue by applying Cotter. The Upper Tribunal found that in applying Cotter the FTT would have concluded that the taxpayer had not forced his claim into the return for 2005/06 where the online form used to submit his tax return prevented him from taking that claim into account in his self-assessment of the tax due for that year.
HMRC had validly closed both enquiries under Schedule 1B of the Taxes Management Act 1970 and in relation to the taxpayer’s 2006/07 return despite the taxpayer’s evidence that he did not understand the effect of those closure notices. Notwithstanding errors in the figures states on those closure notices, a reasonable taxpayer would have understood that the entire claimed loss was being denied.
Whilst claims for loss relief under the Income and Corporation Tax Act 1988 are likely now historic, the decision confirms that the tax law rewrite which led to the Income Tax Act 2007 did make substantive changes to the mechanics by which those claims operate.
Joshua Carey and Sam Way appeared for HMRC.
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