“Entitlement to claim (1) An individual who is eligible for share loss relief may make a claim for the loss to be deducted in calculating the individual’s net income – (a) for the year of the loss, (b) for the previous tax year, or (c) for both tax years. (See Step 2 of the calculation in section 23.) (2) If the claim is made in relation to both tax years, the claim must specify the year for which a deduction is to be made first. (3) Otherwise the claim must specify either the year of the loss or the previous tax year. (4) The claim must be made on or before the first anniversary of the normal self-assessment filing date for the year of the loss.”
“Deduct the loss in calculating the individual’s net income for the specified tax year.”
“Box 3 of page Ai 3 shows capital losses realised on disposal of subscriber shares in an unlisted trading company in year ended5 April 2011 . These losses have been carried back to year ended5 April 2010 and relief claimed under s 131, s 132 ITA 2007.”
“You may need to make an adjustment to increase or decrease your tax for 2009-10 because you are … carrying back to 2009-10 certain losses from 2010-11 …”
“The reduction in tax payable in box 15 of page TC 2 relates to the loss carry back claim arising from the carry back of losses of GBP 414,500 as set out on page Ai 3. The corresponding reduction in tax payable in the year ended5 April 2010 following this loss carry back claim is GBP 165,800 being GBP 414,500 at 40 per cent.”
“I have incurred a capital gains loss of GBP 414,500 on the sale of unlisted shares in 2010/11 and claim the loss under s132(B) [sic], ITA 2007 against my income in 2009/10. This loss relief has already been claimed and relief obtained in 2009/10.”
“(a) to make and deliver to the officer … a return containing such information as may reasonably be required in pursuance of the notice, and (b) to deliver with the return such accounts, statements and documents, relating to information contained in the return, as may reasonably be so required.”
“… shall include a self-assessment, that is to say – (a) an assessment of the amount in which, on the basis of the information contained in the return and taking into account any relief or allowance a claim for which is included in the return, the person making the return is chargeable to income tax and capital gains tax for the year of assessment; and (b) an assessment of the amount payable by him by way of income tax …”
“This Chapter is subject to paragraph 2 of Schedule 1B to TMA 1970 (claims for loss relief involving two or more years).”
“16. In my view it is clear, in particular from paragraphs 2(3)(6), that the scheme in Schedule 1B allows a taxpayer, who has suffered a loss in a later year (“year 2”) and seeks to attribute the loss to an earlier year of assessment (“year 1”), to obtain his relief by reducing his liability to pay tax in respect of year 2 or by obtaining a repayment of tax in year 2. It does not countenance by virtue of the relief any alteration of the tax chargeable and payable in respect of year 1. On the contrary, the sum for which the taxpayer receives relief in year 2 is the difference between what was chargeable in year 1 and what would have been chargeable “on the assumption that effect could be, and were, given to the claim in relation to that year”: paragraph 2(4). In other words, the relief is quantified on the basis that the tax liability in year 1 has already been assessed. 17. Income tax is an annual tax, and liability to such tax is calculated in relation to a particular tax year: sections 4 and 23 of the 2007 Act. Mr Gordon, who appeared for Mr Cotter, did not argue in this court that he was entitled to deduct the relief against income and gains in 2007/2008. He accepted that paragraph 2(6) of Schedule 1B to the 1970 Act provides that effect is to be given to the claim in year 2. He was correct to make that concession. Accordingly, the claim did not affect the amount of tax which was chargeable or payable in relation to 2007/2008. There was therefore no issue between the parties as to the correct assessment to tax in that year.”
“24. Where, as in this case, the taxpayer has included information in his tax return but has left it to the revenue to calculate the tax which he is due to pay, I think that the revenue is entitled to treat as irrelevant to that calculation information and claims, which clearly do not as a matter of law affect the tax chargeable and payable in the relevant year of assessment. It is clear from sections 8(1) and 8(1AA) of the 1970 Act … that the purpose of a tax return is to establish the amounts of income tax and capital gains tax chargeable for a year of assessment and the amount of income tax payable for that year. The revenue’s calculation of the tax due is made on behalf of the taxpayer and is treated as the taxpayer’s self-assessment: section 9(3)(3A) of the 1970 Act … 25. The tax return form contains other requests, such as information about student loan repayments (page TR2), the transfer of the unused part of a taxpayer’s blind person’s allowance (page TR3) or claims for losses in the following tax year (box 3 on page Ai3) which do not affect the income tax chargeable in the tax year which the return form addresses. The word “return” may have a wider meaning in other contexts within the 1970 Act. But, in my view, in the context of sections 8(1), 9, 9A and 42(11)(a) of the 1970 Act, a “return” refers to the information in the tax return form which is submitted for “the purpose of establishing the amounts in which a person is chargeable to income tax and capital gains tax” for the relevant year of assessment and “the amount payable by him by way of income tax for that year”: section 8(1) [of] the 1970 Act, as substituted firstly bysection 178(1) of the Finance Act 1994 and then further amended bysection 121(1) of the Finance Act 1996 and by section 114 of and Schedule 27 to theFinance Act 2007 . 26. In this case, the figures in box 14 on page CG1 and in box 3 on page Ai3 were supplemented by the explanations which Mr Cotter gave of his claim in the boxes requesting “any other information” and “additional information” in the tax return. Those explanations alerted the revenue to the nature of the claim for relief. It concluded, correctly, that the claim undersection 128 of the 2007 Act in respect of losses incurred in 2008/2009 did not alter the tax chargeable or payable in relation to 2007/2008.
“This Chapter is subject to paragraph 2 of Schedule 1B to TMA 1970 (claims for loss relief involving two or more years).”
“(1) In the Act any reference to a claim or election is to a claim or election in writing or in any form authorised (in relation to the case in question) by directions under section 118 of FA 1998. (2) For further information about claims and elections, see TMA 1970 (in particular, section 42(2), (10) and (11) and Schedule 1A).”
“The difference in treatment certainly suggests the possibility that whereas paragraph 2 of Schedule 1B was to apply to Chapters 2 and 5, it was not to apply to Chapter 6. However, I consider that the difference in the statutory provisions is not clear enough to [amount to] it being “otherwise provided” for the purposes of section 42(1). I consider that the provisions of section 60(2) and 128(7) are in the nature of signposts to paragraph 2 of Schedule 1B. The fact that there is no similar signpost in Chapter 6 gives one reason to reflect on the possible reasons for that but in the end I do not regard this matter as clear enough to amount to it being otherwise provided for the purposes of section 42(1).”
“Sections 132 and 133 of ITA are specific as to the entitlement to make a claim to deduct capital losses from income; section 42 and Schedule 1B of TMA are specific as to the procedure for making claims and as to the effect of claims.”
“I consider that those words are used because Schedule 1B identifies “the certain claims” to which it applies. I do not read the words of section 42(11A) as if they provided that Schedule 1B only applies to claims which are identified in some other statute as claims to which Schedule 1B is to apply.”
“In any case, the decision in Cotter is helpful in that it contains, in particular at [16] and [17], a detailed explanation of how paragraph 2 of Schedule 1B of TMA works even when it is read in conjunction with sections 128 and 129 of ITA, which refer to making a deduction from income in a previous tax year; as I have stated more than once, sections 128 and 129 are similar to sections 132 and 133.”
“The first decision was reached following the decision of the Court of Appeal in Cotter and the second decision involved a review of the earlier decision following the decision of the Supreme Court in Cotter. The Upper Tribunal considered in detail whether it was appropriate for HMRC to open its enquiry under section 9A of TMA or under Schedule 1A of TMA. What is said to be relevant about the decisions is that the taxpayer claimed relief under both Chapter 2 and Chapter 6 of Part 4 and the argument and the decisions proceeded on the basis that section 42(11A) and paragraph 2 of Schedule 1B to TMA applied to a claim to relief under Chapter 6 of Part 4 of ITA. However, because there was no argument on that point, the decisions do not constitute an authority on that point.”
“… there are three stages in the imposition of a tax: there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment. That, ex hypothesi, has already been fixed. But assessment particularises the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay.”
“27. Matters would have been different if the taxpayer had calculated his liability to income and capital gains tax by requesting and completing the tax calculation summary pages of the tax return. In such circumstances the revenue would have his assessment that, as a result of the claim, specific sums or no sums were due as the tax chargeable and payable for 2007/2008. Such information and self-assessment would in my view fall within a “return” under section 9A of the 1970 Act as it would be the taxpayer’s assessment of his liability in respect of the relevant tax year. The revenue could not go behind the taxpayer’s self-assessment without either amending the tax return (section 9ZB of the 1970 Act …) or instituting an inquiry under section 9A of the 1970 Act. 28. It follows that a taxpayer may be able to delay the payment of tax by claims which turn out to be unfounded if he completes the assessment by calculating the tax which he is due to pay. Accordingly, the revenue’s interpretation of the expression “return” may not save it from tax avoidance schemes. But what persuades me that the revenue is right in its interpretation of “return” is that income tax is an annual tax and that disputes about matters which are not relevant to a taxpayer’s liability in a particular year should not postpone the finality of that year’s assessment.”
“52. I consider that it is clear that Mr Derry’s tax return for 2009-2010 assessed his liability to tax in the sum of£95,546.36 . That is the figure stated in the appropriate place in the return for the amount of tax payable. It is also clear that Mr Derry wished to claim relief for what he said were his capital losses. I consider that the tax return should be construed against the background of the relevant legal provisions. Under Chapter 6 of Part 4 of ITA, Mr Derry is able to make a claim in relation to such capital losses against the income in the year 2010-2011 and also the year 2009-2010 but such a claim relates to the year 2010-2011 and does not reduce the tax payable for the year 2009-2010. Against that background, I consider that the presence of the claim for capital losses does not displace the clear assessment to tax in the sum of£95,546.36 .”