The UT has rejected the taxpayer’s appeal against closure notices that refused a claim for terminal loss relief carry back.
The taxpayer in this case appealed to the First-tier Tribunal (FTT) against closure notices in respect of HMRC enquiries into two of its corporation tax (CT) returns. Following the enquiries, the closure notices were issued, with a substantial amount of terminal loss relief that had been carried back refused. The taxpayer argued that the claim to carry back terminal loss relief was a stand-alone claim that could not be validly dealt with under Schedule 18 to Finance Act 1998 (the statutory provision which allows HMRC to open enquiries into what was contained or required to be contained in a return) but instead needed a separate enquiry under Schedule 1A to the Taxes Management Act 1970. They also argued that the closure notices did not affect the claims at issue. The FTT rejected these arguments and decided that the enquiries were validly opened under the correct statutory provisions. The taxpayer appealed this decision to the Upper Tribunal (UT).
The UT noted that the claim for terminal loss relief arose principally from a deduction for goodwill amortisation, which was asserted to arise in the final 18 month accounting period and was properly to be contained in the returns for this period. Counsel for the taxpayer had attempted to draw a distinction between the amortisation of goodwill which was the asserted foundation for the loss and the claim to carry this loss back, but the UT rejected this reasoning, finding that the key component of the terminal loss relief was the goodwill amortisation and without this being established, the loss relief claim failed. It therefore agreed with the FTT that the terminal loss relief claim could not be viewed as a stand-alone claim.
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