Nigel Barklem v The Commissioners for HMRC
[2024] EWHC 651 (Ch)
Roger Murphy v The Commissioners for HMRC
13 June 2024
[2024] UKFTT 537 (TC)
First-tier Tribunal
Mr. Murphy tried to get tax relief for losses from a dodgy investment scheme. The tax office's first attempt to deny him the relief was wrong, but their second attempt was good enough, even though it had a small mistake in the numbers. The court said the tax office's second attempt to deny him relief was fine, even with the number mistake because it was clear what they meant.
Key Facts
- •Appeal against two closure notices relating to tax years 2005/06 and 2006/07.
- •Disputed relief under section 574 ICTA for losses from the 'Excalibur' tax avoidance scheme.
- •Tax at issue: £183,140.43.
- •Scheme's failure established in previous Kerrison v HMRC cases.
- •Dispute centers on validity of HMRC enquiries and closure notices.
- •Claim for relief reflected in Mr. Murphy's tax returns for 2005/06 and 2006/07.
- •HMRC initially issued enquiry notices under paragraph 5, Schedule 1A TMA (2005/06) and section 9A TMA (2006/07).
- •Closure notices issued by HMRC contained errors.
- •Mr. Murphy's claim was for carry-back of losses under section 574 ICTA.
Legal Principles
Validity of HMRC enquiries and closure notices; whether claims were made 'in' or 'on' a return.
Taxes Management Act 1970 (TMA), sections 9A, 28A, Schedule 1A, Schedule 1B; Income and Corporation Taxes Act 1988 (ICTA), section 574; Income Tax Act 2007 (ITA), sections 131-133.
Effect of errors in closure notices; application of section 114 TMA.
Raftopoulou v HMRC [2018] EWCA Civ 818; HMRC v Mabbutt [2017] UKUT 289 (TCC); TMA, section 114.
Whether a taxpayer is entitled to deduct losses in computing income tax liability and include the claim in their tax return.
Derry v HMRC [2019] UKSC 19; HMRC v Cotter [2013] UKSC 69; R (on the application of de Silva) v HMRC [2017] UKSC 74.
Whether a claim made 'on' but not 'in' a return requires an enquiry under Schedule 1A TMA or section 9A TMA.
HMRC v Cotter [2013] UKSC 69; R (on the application of Derry) v HMRC [2017] EWCA Civ 435; Derry v HMRC [2019] UKSC 19.
Whether HMRC can enquire into a carry-back claim through an enquiry into the return for the year the loss arose.
R (on the application of de Silva) v HMRC [2017] UKSC 74.
Outcomes
Appeal dismissed.
Mr. Murphy's claim was not made 'in' his 2005/06 return, but was 'in' the return in accordance with Derry CA, invalidating the Schedule 1A TMA enquiry and closure notice. However, HMRC's enquiry into the 2006/07 return under section 9A TMA was valid and the closure notice, while containing errors, was effective to disallow the claim under section 574 ICTA.