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

The FTT identified the Second Share Loss Relief issue in the following terms at [48(2)] of the Decision:

The FTT concluded at [72]-[74] that HMRC was not entitled to enquire into the 05-06 return as if the relief claim were made outside a return. Thus, the enquiry notice, and closure notice under schedule 1A TMA were invalid – the enquiry for the return should have proceeded under section 9A TMA:

“72.

In the present case, we have decided that Mr Murphy was not entitled to make a claim for share loss relief in his return for the tax year 2005/6. Mr Murphy filed his return. The return refers to the loss relief in the parts of the return concerned with the carry-back of losses from later years. The amount of the claim is not reflected in the calculation of the tax due for 2005/6 because the box in the return was populated automatically. Nonetheless it is clear on the face of the return that Mr Murphy was claiming to set the loss arising on the disposal of the shares against his taxable income for the tax year 2005/6.

73.

This is, of course, the issue that was addressed by the Court of Appeal in Derry CA. Henderson LJ expressed the view that, in these circumstances, the claim should be regarded as being included in the return and that HMRC must enquire into the return under section 9A TMA. As this was the ratio of the decision, the decision of the Court of Appeal on this issue is binding upon us. There are circumstances in which the Supreme Court can effectively overrule a decision of the Court of Appeal by an expression of opinion which is strictly obiter. However, those circumstances are very limited: it would in effect require a direction from the Supreme Court as whole that the relevant case was wrongly decided. The reservations expressed by Lord Carnwath together with the provisional view expressed by Lady Arden in Derry SC, cannot be taken as meeting that requirement.

74.

We must therefore conclude – relying upon the obiter comments of Lord Hodge in Cotter as applied by the Court of Appeal in Derry CA – that, although Mr Murphy was not entitled to make his claim in his tax return for the tax year 2005/6, he made a claim for share loss relief “in” that return. HMRC were required to proceed with any enquiry under section 9A TMA. They did not do so. The enquiry into the claim under paragraph 5 Schedule 1A TMA was not valid and the relevant closure notice under paragraph 7 Schedule 1A TMA was equally not valid.”