A taxpayer has won his case against HMRC at the Supreme Court (SC).  The taxpayer had purchased some shares in a company for £500k and then subsequently sold them for £85.5k generating a loss of £414.5k.  He disposed of them on 4 November 2010, the tax year 2010/11.  Within the filing deadline for the 2009/10 return (ie before 31 January 2011) the taxpayer filed his return for the 2009/10 year claiming the share loss relief against total income.  HMRC then had 12 months from the filing date to open an enquiry into his return 2009/10 return.

In December 2011 he filed his return for 2010/11 which stated that the loss of £414.5k had already been claimed and obtained against his total income of 2009/10.  HMRC then opened an enquiry for the share loss relief claim and an enquiry into his 2010/11 return.  HMRC held that the claim “related” to 2010/11 and not 2090/10 and that they were entitled to enquire into the claim even though enquiries into the 2009/10 return had been time barred.

The SC disagreed; they considered that the legislation for the calculation of tax liabilities was clear that the taxpayer could correctly deduct the share loss relief in the calculation of net income for the previous tax year, 2009/10.  The SC referred to the legislation that HMRC relied as obscure and that “the 2007 Act should take precedence in the absence of any indication to the contrary”.

The decision can be found at: R (on the application of Derry) (Respondent) v Commissioners for Her Majesty’s Revenue and Customs (Appellant) – The Supreme Court

This decision is welcomed as it upholds the plain reading of tax statutes.  Within the relevant parts of the legislation regarding share loss relief there is no reference to the legislation that HMRC relied upon, and the SC has highlighted the primacy of the liability legislation.

If you have received an enquiry or other correspondence from HMRC regarding any of your tax affairs please contact us.  We can help with negotiations and discussions with HMRC as we are very experienced.