A group of taxpayers that used a marketed tax avoidance scheme have lost their appeal at the Court of Appeal (CoA) concerning procedures that HMRC used to enquire into their returns.

Similar to many other film investment partnership tax avoidance schemes HMRC had issued closure notices to the partners of a partnership amending their tax returns for the earlier years.  The taxpayers had contended that HMRC were not allowed to open enquiries into the relevant tax returns as the claims were made outside returns and didn’t relate to the later tax year.  The Supreme Court (SC) had  decided on a similar case and found that the legislation did indeed mean that the enquires related to later years (see our analysis of the case here) as the legislation regarding trade losses specifically referred to another piece of legislation about claims over multiple years that allows the later enquiry of tax returns.

The taxpayers sought reliance on another case concerning carry-back relief decided at the SC (see our analysis here) but this related to share loss relief and not trade loss relief and the legislation for share loss relief had no express reference to the other piece of legislation so a claim in an earlier year could only be related to that year.  The CoA rejected the comparison to the share loss relief case as this concerned different legislation.

The taxpayers argued that the case regarding trade loss relief that had been decided at the SC that would bind the CoA to the SC’s decision wasn’t relevant as for later tax years the tax legislation had been consolidated and rewritten for clarity in the newer Income Taxes Act 2007 and returns were to be computed in accordance with the rewritten tax code.  The CoA rejected this argument, noting that the substance of the varying provisions hadn’t changed significantly and that they were still bound to the SC’s prior decision.

The decision can be found at: Knibbs & Ors v Revenue And Customs – Find case law (nationalarchives.gov.uk)

This is another case from film partnership tax avoidance schemes and the latest appeal has been defeated, again.  Please contact us if you have been marketed a tax avoidance scheme, we can advise on their effectiveness, many schemes have been shown not to work.