Appeals, disputes and investigations
Appeal on validity of carried back loss enquiry dismissed
The Upper Tribunal (UT) has upheld a First-tier Tribunal (FTT) decision on the validity of enquiry notices relating to losses incurred in one year, but carried back to and included on the tax return of the previous year.
The taxpayer entered into an avoidance scheme since found not to work. Losses were created through this scheme in 2006/07, which he carried back to 2005/06 through his 2005/06 tax return. The HMRC enquiry notice into the claim was issued on the basis that the claim had been made outside a return, though it was included on the 2005/06 return. HMRC also issued an enquiry into the 2006/07 return, which included a note about the claim.
The FTT agreed with the taxpayer that the original enquiry notice into a claim outside a return was invalid, as issued on the wrong basis. However, the enquiry into the 2006/07 return was valid, so the closure notice disallowing the loss could still be upheld, and the taxpayer lost his appeal. The UT dismissed the taxpayer’s appeals, finding that the claim in 2005/06 was not made ‘in’ his return but ‘on’ it as a standalone claim, meaning the enquiry notice into the claim was valid. It also agreed with the FTT that the enquiry into the 2006/07 return was valid.
Murphy v HMRC [2025] UKUT 165 (TCC)
From Tax Update June 2025, published by S&W Partners LLP
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