Duncan v Revenue & Customs (INCOME TAX - carried forward property business losses) [2021] UKFTT 81 (TC) (25 March 2021)

Duncan v Revenue & Customs (INCOME TAX - carried forward property business losses) [2021] UKFTT 81 (TC) (25 March 2021)

The statutory framework requires that carried forward property business losses are deducted at Step 2 of the s23 ITA 2007 calculation, before personal allowances at Step 3. Section 118(4) ITA 2007 and s25(3) make this order mandatory, overriding any flexibility in s25(2). As a result, Ms Duncan's losses were exhausted in prior years and not available for 2017-2018. HMRC validly opened an enquiry under s9A TMA 1970 because the loss claim was included in the return and affected the tax liability for the year in question.

Citation
[2021] UKFTT 81 (TC)
Parties
Appellant: Sarah Duncan; Respondents: The Commissioners for Her Majesty’s Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
25 March 2021
Procedural Posture
Tax Appeal (first Tier Tribunal) / Appeal Against Closure Notice (income Tax, Carried Forward Property Business Losses)
Outcome
Appeal dismissed
Legal Topics
Income Tax, Carried Forward Property Business Losses, Personal Allowance, Tax Return Enquiries, Statutory Interpretation
Tax Law Income Tax Carried Forward Property Business Losses Personal Allowance Tax Return Enquiries Statutory Interpretation

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Parties

Sarah Duncan

Appellant

The Commissioners for Her Majesty’s Revenue and Customs

Respondents

Procedural Posture

Tax Appeal (first Tier Tribunal) / Appeal Against Closure Notice (income Tax, Carried Forward Property Business Losses)

Legal Issues

  1. 1 Whether carried forward property business losses must be applied in priority to personal allowance in subsequent tax years
  2. 2 Whether HMRC validly opened an enquiry under s9A TMA 1970 or should have proceeded under Schedule 1A

Ratio Decidendi

The statutory framework requires that carried forward property business losses are deducted at Step 2 of the s23 ITA 2007 calculation, before personal allowances at Step 3. Section 118(4) ITA 2007 and s25(3) make this order mandatory, overriding any flexibility in s25(2). As a result, Ms Duncan's losses were exhausted in prior years and not available for 2017-2018. HMRC validly opened an enquiry under s9A TMA 1970 because the loss claim was included in the return and affected the tax liability for the year in question.

Court Disposition

Appeal dismissed

Orders

  • The amendments made by the closure notice stand good.