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

The second part of the FTT’s reasoning at [61] was that there is good reason to conclude that Derry SC is not binding in relation to s.574 ICTA because the ITA made a material change to the law as to the application of Schedule 1B TMA to share loss relief claims.

We also agree. We respectfully reject Mr Grierson’s submission that ITA was purely intended to include a rewrite of ICTA and made no change of the law in relation to claims for share loss relief. He relied upon a report to the House of Lords and House of Commons Joint Committee on Tax Law Rewrite Bills and an academic article in Statute Law Review to submit that ITA was only a consolidating and rewrite statute.

However, ss.131-133 ITA specifically distinguish share loss relief by not referring to Schedule 1B TMA whereas ss.60(2) and 128(7) ITA expressly stipulate that trading and employment loss reliefs are subject to schedule 1B TMA. The implication of [38] of Derry SC is that, after the implementation of the ITA, the existing application of Schedule 1B TMA to ss.380-381 ICTA was made express in relation to their successor ITA provisions but there was a material departure in relation to share loss relief under s.132 ITA: Schedule 1B was not expressed to, nor did, apply to share loss relief claims under s.132 ITA.

Therefore, the ITA did not simply clarify, codify or restate the law but involved a material change in this limited respect from ICTA (whatever the stated intention of the law revision project). There is support for this proposition in Knibbs at [66] in which the Court of Appeal relied on Lady Arden’s judgment in Derry SC at [86] for the conclusion that the ITA made minor changes from the previous legislation:

It is also apparent that share loss relief provisions in ITA and ICTA are different. It is understandable how the Supreme Court in Derry SC came to view ss.131-133 ITA as a self-contained code for claiming share loss relief which, in the absence of express reference to Schedule 1B TMA applying, prevailed over it. Lord Hodge partly relied upon this at [35].

We accept Mr Grierson’s submission that s.574(1) ICTA stipulates the form and time limits for making a share loss relief claim and s.132 ITA introduces nothing new in that regard. Ss.380(1) & 574(1) ICTA each make provision for the form of a claim including the time limit in which it is to be made, just as ss. 64(5) & 132(4) ITA do. Nonetheless, ss.131-133 ITA do more than simply transpose or mirror s.574 ICTA. Notably, even to the casual observer, ss.131-133 ITA provide a more detailed or complete code for claiming and calculating the amount of share loss relief than s.574 ICTA. A comparison table is set out in Annex A.

S.132 ITA contains more detailed requirements than s.574(1) ICTA on the process or procedure for making the claim and s.133(1)-(3) ITA contains more requirements on the calculation of the claim than s.574(1)(a) & (b) ICTA. For example, the extra provisions in s.133 on the calculation of the loss to be deducted do not appear in s.574(1). Ss.132(1) & 133(1) ITA expressly incorporate or refer to s.23 ITA, a new provision, on how the income tax liability is to be calculated. Lord Hodge in Derry SC noted and relied upon these provisions at [35] in support of ITA providing a self-contained code. However, they do not appear in ICTA. (Footnote: ³)

Thus, we agree with the FTT that there was a material change in law as to how claims might be made for share loss relief from s.574 ICTA to ss.131-133 ITA and that Schedule 1B TMA applied to the former, not the latter.