R (on the application of Derry) (Respondent) v Commissioners for Her Majesty’s Revenue and Customs (Appellant)

This case involved an appeal by the Commissioners for Her Majesty's Revenue and Customs (HMRC) against a decision of the Court of Appeal which had allowed a claim by the respondent, Mr Derry, for share loss relief under section 132 of the Income Tax Act 2007. The appeal raised two issues: the first concerned the correct treatment for income tax purposes of Mr Derry's claim for share loss relief, and the second concerned the effect of the inclusion of such a claim within Mr Derry's tax return for the previous year, in circumstances where HMRC had failed to institute a timely enquiry into the return under the Taxes Management Act 1970. The Supreme Court dismissed the appeal. On the first issue, the Court held that Mr Derry was entitled to make his claim for share loss relief in the year 2009/10, contrary to the decisions of the Upper Tribunal and the Court of Appeal. The Court found that the provisions of the Income Tax Act 2007 gave clear and conclusive guidance as to the treatment of Mr Derry's claim for share loss relief for the purposes of assessing his liability for the tax year 2009/10, and that this was not overridden by anything elsewhere in the Act or in the Taxes Management Act 1970. On the second issue, the Court found it unnecessary to reach a conclusion, given its decision on the first issue. However, the Court expressed the view that if Mr Derry was wrong on the first issue, and the inclusion of the loss relief claim in the assessment of his liability for 2009/10 was in error, the claim could only be challenged by a notice served within time under section 9A of the Taxes Management Act 1970. The Court noted that the Revenue's difficulty in the present case arose simply from their failure to take the obvious step of opening an enquiry into the 2010 return within the statutory time limit. The Court also noted the importance of clarifying the precise legal status of the different parts of the tax return, and any relevant differences between the paper and electronic versions of the return, and their practical consequences.