‘1. I do not agree that the claim to set the loss of£127,500 against Mr Stanley’s 2009-10 income is invalid. All of the information relating to the claim was previously forwarded to your office, including the EIS certificates that supported the initial investment. EIS relief was not claimed on the original shareholding because the company did not trade for three years. The original claim under Section 132(1) ITA 2007 was made in correspondence to HMRC in January 2011. It was then added to the amended 2009/10 tax return to claim the tax repayment. 2. I confirm that the claim to set the loss of£135,000 against Mr Stanley’s income was out of time and therefore, invalid.’
‘You made a claim to carry the loss back to 2009 and set against your general income however you were out of time to make this claim. You can make the loss of£135,000 available to be carried forward against future capital gains instead.’
‘You mention in your letter that your client made a valid claim under Section 132(1) ITA 2007 for the loss of£127,500 in Data SMS. You state this was in the form of correspondence to HMRC in January 2011. Please provide a copy of the correspondence.’
‘In these papers I see your “claim” to relief under Section 132(2) ITA 2007 for the shares held in Data SMS. Unfortunately, I cannot accept this as a valid claim because this does not meet the correct procedure to claim under Section 42(2) TMA 1970 whereby the claim must be made in the return where possible . It would be possible for your client to make the claim in the return however your client submitted his original return on2 February 2012 when the notice to file was issued6 April 2010 . I am unable to accept the loss of£127,500 for shares in Data SMS.’
‘Did you read any HMRC helpsheets or guidance before claiming losses in Data SMS or Obus plc? Did you seek any professional advice on claiming these losses? If yes, provide details of what advice was given and copies of any written advice. What information was presented to your advisors to make the claims? And when was this presented to them? Explain why these loss claims were incorrectly made.’
‘ Telling : You have admitted the loss in Obus Plc is out of time however you are yet to acknowledge the inaccuracy in the loss claim in Data SMS therefore a full reduction cannot be given. Helping : You have given minimal help during the course of compliance check as there has been little in the way of active engagement. I cannot allow a full reduction as there has been little in the way of positive assistance. Giving : 2 formal notices have been issued and 1 initial penalty. I as the caseworker had to obtain some of the details myself as they were not given by you. You have failed to reply to my behaviours questions. I cannot allow a full reduction for these reasons.’
‘We submitted a claim for the losses in writing back in January 2011 which was within time and had expected that claim to be valid. It was only on discussing the technical aspects with yourself at a later date that it was realised that the written claim was not effective. This was not a “deliberate” act, but a mistake and indeed the written claim was believed to be sufficient to claim the losses from the outset. The late tax return included the losses because it was believed that the claim had been made in time.’
‘I refer to your query regarding the loss relief. A claim under S132(1) ITA 2007 must be made on or before the first anniversary of the normal filing date for the year of the loss. Therefore it would appear that any claims for 2007-08 and earlier are out of date.’
‘Given that your client is making a fresh claim that his shares became of negligible value I will need evidence to support of the amounts and dates invested, such as bank statements showing the withdrawals of money to invest in the companies, share purchase certificates and so on. … Please also provide any documentation you [sic] client received in respect of the shares having no value such as correspondence from the Liquidator including any Statement of Affairs and so on. I will then consider his claims under Section 24 TCGA 1992. If the conditions are met I will then review his claim to have the capital losses set against other income under Section 131 ITA 2007.’
‘In the absence of a reply from you my papers have been reviewed’ and gave the conclusion that the EIS claims for Obus plc, Data SMS, and LB Holdings were disqualified for the three years from 2005-06 to 2007-08. The letter continued by advising that: ‘… the claims under S132(1) ITA 2007 are time barred as they were not made on or before the first anniversary of the normal Self Assessment filing date for the year of the loss.’
‘In respect of the claims under S132 being time-barred, his response was that because the enquiry window is still open does that not extend the time limit. I said I didn’t think so but would confirm either way in writing.’
‘the fact that there is an open enquiry does not alter the fact that the claims under S132 are time-barred.’
‘We believe we were in time to make the claim because of the actual timing of event, that we were outside the normal event because we were within the enquiry to clear up everything.’
‘A claim was made with regard to the S132(1) ITA 2007 losses which at the time was believed to have been made correctly, firstly in writing and then through the tax return. We have accepted that the claim was not acceptable and is not to be given, however, to then be given a penalty of£46,822.86 and charged interest of£5,055.68 appears to be out of all proportion with an outstanding tax liability of£930.22 .’
‘The claim must be made on or before the first anniversary of the normal self-assessment filing date for the year of loss.’
‘… the only way there could have been a disposal would have been that a deemed disposal had occurred. This could only have arisen as a result of a s 24(2) claim. There was no dispute that the shares in Gemforce were of negligible value on1 December 1994 …. If shares became of negligible value, there could be no deemed disposal without a claim … the wording of s 24(2) … required the owner of an asset to make a claim to the effect that the value of that asset had become negligible. In other words, it was a claim which created the deemed disposal.’
‘The first issue, given the acceptance that there was a proper and timely claim under s 574, is whether on the proper construction of that section, it was necessary as a condition precedent to any claim under the section that a claim had first been made by the claimant under s 24(2) of the 1992 Act. The section [ie s 574 ICTA] refers to “ an allowable loss (for capital gains tax purposes)”. In order to establish an allowable loss, … there must either be a disposal or a deemed disposal. In the absence of anything amounting to an actual disposal during 1994-95, the Appellant needs to show a deemed disposal in order to crystallise the loss incurred. In the circumstances, the only way of doing so is by virtue of a s 24(2) claim.’
‘To succeed, [a s 24 TCGA claim] would have to point unambiguously to what it was claiming. If it was a claim, how could the Revenue identify it as such, or investigate or refuse it?’
‘The legislation is quite specific in requiring claims to be quantified and, as a matter of the normal use of language, we do not see that “quantified” can be read as meaning “capable of being quantified”. In this case, it is true that the calculation needed was easy and obvious, but it may not always be so in the case of taxpayers whose affairs are not as straightforward as Mr Robin’s are, and the legislation is in terms which require certainty so that it can [be] ascertained without difficulty and debate what the taxpayer’s entitlement is.’
‘… we accept that immediately prior to that [Mr Ward] made a NVC claim, by way of an online request to reduce payments on account [1] saying that “The Tax Allowances and reliefs have gone up”. He did not specifically make reference to a NVC, but it was clear that he was referring to his share loss relief claim and he provided the figures in his postponement application. The NVC was therefore quantified.’
‘Please accept this letter as a claim for losses incurred by Mr Stanley with regard to his investments in Obus Plc, Data SMS Limited and LB Holdings Limited under S 131(1) ITA 2007 as shown on the attached schedule.’
‘… as discussed in our earlier letter of16 September 2010 we wish to withdraw the claim for EIS on the Obus plc and Data SMS Limited shares on the basis that the shares did not qualify for EIS income tax relief as they did not trade for the required three years after the investments were made.’
‘None of these losses have been claimed to date and therefore, the Obus plc loss claim is out of date . We will however, issue a claim with regard to the Data SMS Limited and LB Holdings Ltd losses under s 131(1) ITA 2007, and carry these back to 2007/08 with regard to L B Holdings Ltd and 2008/09 with regard to Data SMS Ltd.’
‘None of these losses have been claimed to date’
‘Schedule 1A, which by reasons of s 42(11) applies to any claim which is not included in a return, provides in para 2 for the form in which any such claim is to be made. HMRC may either give effect to the claim (para 4(1)) or inquire into it under para 5. An inquiry is brought to completion by the issue of a closure notice under para 7. If the closure notice is adverse to the taxpayer, he may appeal to the tribunal under para 9.’
‘There are significant differences to both the liability to pay tax and the time for any inquiry by HMRC, depending on whether the claim is made in the return or in a separate claim to which Sch 1A would apply.’
‘Section 42(2) of this Act shall not apply in relation to the claim.’
‘The claim [for relief for the earlier year] shall relate to the later year.’
‘This [para 2 of Sch 1B] is a deeming provision: the claim does not relate to the earlier year but it is treated as if it did for the purpose of determining its amount . The same formula is repeated in para 2(5) [of Sch 1B] as regards “associated claims”. Paragraph 2(6) provides that “Effect shall be given to the claim in relation to the later year”.’
‘HMRC are correct in their submission that Mr Cotter’s claim for loss relief related to the 2008-09 year of assessment and so could not be included in his return for 2007-08 .’
‘In my view it is clear, in particular from paras 2(3) and (6), that the scheme in Sch 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. […]’
‘Assuming that Mr Derry had made capital losses in the year 2010-2011, in relation to which he could claim relief under Ch 6 of Pt 4 of ITA, then it is agreed that it was open to him to make such a claim in his tax return for the year 2009-2010, rather than in some other document.’
‘[48] First of all, I reject the Appellant’s argument that a claim under Sch 1B to the TMA can only be made by way of a “stand-alone claim” under Sch 1A of that Act, or can only be investigated by means of an enquiry under para 5(1) of Sch 1A to the TMA . All that para 2(2) of Sch 1B does is to disapply the rule in s 42(2) of the TMA that, if a claim can be made in a return, it must be so made. The effect of disapplying the s 42(2) restriction is that a Sch 1B claim may be made in a return, or may be made as a stand-alone claim outside a return, whether by way of a separate letter, or otherwise. [49] Second, … no matter how a claim for relief has initially been “made”, the claim for relief is nonetheless required to be included in the return of the individual taxpayer for the year in which the losses were actually made by the partnership (ie here the later year – Year 02).’
‘… I consider that the Revenue would have had a choice as to which enquiry route it took, if indeed there had been a separate stand-alone claim made prior to the Year 02 self-assessment returns. ... normally, the appropriate point of challenge for the carry-back claim in respect of partnership losses incurred in Year 02 has to be at the time when such losses are included in the partnership return and the individual partner’s return for that year. What is clear, however …, is that if the Revenue chooses to challenge, by means of the procedure under Sch 1A, para 5(1), an earlier stand-alone claim for relief, made in advance of the obligation to include such claim for relief in respect of the relevant losses in the self-assessment return in respect of the year in which they are incurred, then it is not open to the Revenue subsequently to challenge the claim again by means of a s 9A enquiry once the self-assessment return is filed . But that was not what happened in the present case, where the only enquiries which took place were those conducted pursuant to s 9A of the TMA in relation to the relevant years in which the partnership losses were incurred.’
‘ Error in taxpayer’s document attributable to another person 1A (1) A penalty is payable by a person (T) where – (a) another person (P) gives HMRC a document of a kind listed in the Table in paragraph 1, (b) the document contains a relevant inaccuracy, (c) the inaccuracy was attributable to T deliberately supplying false information to P (whether directly or indirectly), or to T deliberately withholding information from P, with the intention of the document containing the inaccuracy.’
‘ Error in taxpayer’s document 1(1) A penalty is payable by a person (P) where – (a) P gives HMRC a document of a kind listed in the Table below, and (b) Conditions 1 and 2 are satisfied. […] 1(3) Condition 2 is that the inaccuracy was careless (within the meaning of paragraph 3) or deliberate on P’s part . ’
‘We consider that the behaviour was “deliberate”. This is explained below. I consider your behaviour to be deliberate because these particular losses have been discussed during a previous compliance check where you were told you were out of time as the time limits on the claims where [sic] detailed on various occasions. You actually acknowledge in a letter dated16 September 2010 the losses in Obus are out of time yet these were entered on the late 2010 tax return on2 Feb 2012 . As for the loss in Data SMS, you were advised several times on the time limits to make the claim after you asked for this to be clarified, yet you made an out of date claim. I believe you were aware of the inaccuracies when you submitted your 2010 tax return as per the previous compliance check therefore a deliberate penalty is applicable.’
‘ Degrees of culpability 3(1) For the purposes of a penalty under paragraph 1, inaccuracy in a document given by P to HMRC is – (a) “careless” if the inaccuracy is due to failure by P to take reasonable care, (b) “deliberate but not concealed” if the inaccuracy is deliberate on P’s part but P does not make arrangements to conceal it, …’
‘well weighed or considered; carefully thought out; formed, carried out, etc. with careful consideration and full intention; done of set purpose; studied; not hasty or rash.’
‘The fact that the deliberate conduct is tied to the inaccuracy, indicates that for this penalty to apply the person must have, in a subjective sense, acted with some level of knowledge or consciousness as regards the inaccuracy.’
‘18(3) […] P is not liable to a penalty under paragraph 1 or 2 in respect of anything done or omitted by P’s agent where P satisfies HMRC that P took reasonable care to avoid inaccuracy (in relation to paragraph 1) or unreasonable failure (in relation to paragraph 2) […]’
‘In my view carelessness can be equated with “negligent conduct” in the context of discovery assessments undersection 29 Taxes Management Act 1970 . In that context, negligent conduct is to be judged by reference to the reasonable taxpayer.’
‘The test to be applied, in my view, is to consider what a reasonable taxpayer, exercising reasonable diligence in the completion and submission of the return, would have done.’
‘What is reasonable care in any particular case will depend on all the circumstances. In my view this will include the nature of the matters being dealt with in the return, the identity and experience of the agent, the experience of the taxpayer and the nature of the professional relationship between the taxpayer and the agent.’
‘If failure to take reasonable care were to be an objective test, Sch 24 would be much harsher than the TMA penalty provisions, because the objective test of negligence at TMA s 95 can be mitigated by the reasonable excuse provisions …’