Key Facts
- •Civic Environmental Systems Ltd (CES) made a loss in the year ended 30 April 2008 (£444,747).
- •CES claimed to carry back this loss against profits for the year ended 30 April 2007 (£142,039).
- •HMRC later found CES's 2007 profits were understated by £540,000.
- •The FTT and UT held that only £142,039 of the 2008 loss could be set off against the 2007 profits.
- •CES appealed, arguing the entire 2008 loss should be set off.
- •CES's claim to carry back losses was made after the deadline for amending its 2007 tax return.
Legal Principles
Carry-back of losses for corporation tax purposes.
s. 393A Income and Corporation Taxes Act 1988 (replaced by s. 37 Corporation Tax Act 2010)
A claim to carry back a loss is a claim to carry back the entire loss, to the extent profits are available.
UT decision at [78]
Unused portion of a carried-back loss is carried forward.
s. 393(1) ICTA 1988
Company tax returns and amendments are governed by Schedule 18, Finance Act 1998.
Schedule 18, Finance Act 1998
Claims not included in returns are dealt with under Schedule 1A, Taxes Management Act 1970.
Schedule 1A, Taxes Management Act 1970
The FTT's function on appeal is to decide whether the appellant was overcharged or undercharged by the assessment.
s. 50 TMA 1970
Outcomes
Appeal dismissed.
The UT correctly concluded that CES's claim to carry back the loss was made after the deadline for amending its 2007 return. Therefore, the claim was dealt with under Schedule 1A TMA 1970, not as an amendment to the 2007 return. The FTT correctly did not consider the s. 393A claim in its assessment of the 2007 return, as it was a 'free-standing claim' handled separately under Schedule 1A.