UT (Tax & Chancery) UT-2024-000113 - [2025] UKUT 00165 (TCC)

This part [[27]-[28]] of Lord Hodge's reasoning [in Derry SC] was obiter, but it followed from his careful analysis of the statutory scheme of schedule 1B and of the information which is properly to be regarded as "included in a return" for the purposes of the claims provisions in TMA 1970. There is a clear distinction between, on the one hand, the inclusion of information which is irrelevant in law to the taxpayer's liability for the year of assessment covered by the return, and, on the other hand, the taxpayer's self-assessment of the tax which he is due to pay. Irrelevant information of the former type, even if entered in the return at the implicit invitation of the Revenue, is not to be regarded as included in the return when it comes to enquiring into the taxpayer's liability for the relevant year. But a taxpayer's self-assessment is a different matter. Plainly, errors of many different kinds may be made in such an assessment, and they may include errors about the availability of a relief. If the Revenue is dissatisfied with the taxpayer's self-assessment, its remedy is either to amend the return or to open an enquiry into it under section 9A of TMA 1970. As pointed out at [20] above, such an enquiry may extend to anything contained (or required to be contained) in the return. The boxes on page TC 2 for "adjustments to tax due" must in my view be regarded as containing information required to be contained in the return, where the taxpayer elects to perform his own self-assessment, because such adjustments form an integral part of the calculation of the tax due to be paid by him for the year in accordance with sections 23 and 24 of ITA . It follows that the information contained in those boxes cannot be regarded as extraneous to the return. As I understand it, this is the essential point which Lord Hodge was making in Cotter at [27], and if I may respectfully say so, I agree with it.

[Emphasis added]

This issue was addressed by the Court of Appeal in R (on the application of Derry) v HMRC [2017] EWCA Civ 435 (“Derry CA”). The Court of Appeal decided the question as to whether the taxpayer was entitled to deduct the relevant loss in calculating his net income for the earlier tax year in favour of HMRC. As we have seen, its decision on that point was then reversed by the Supreme Court, but it then went on to consider the effect of the claim that the taxpayer had erroneously made. On that issue, the Court of Appeal, relying upon the obiter dicta of Lord Hodge in Cotter, decided that references to the carried-back loss in the tax return form albeit not in the tax computation should be regarded as being included “in” the return. This was the case even though the claim was not reflected in the calculation of the total tax due – it could not be because the on-line form automatically calculated the tax without taking into account the carried-back loss – and the claim was otherwise referred to in the part of the return that related to the carry back of losses from later years.

[Emphasis Added]