In R (on the application of Derry) v HMRC [2019] UKSC 19 the Supreme Court dismissed HMRC’s appeal; HMRC had opened the wrong type of enquiry into a share loss relief carry back claim.

In R (on the application of James Derry) v HMRC [2017] EWCA Civ 435  which dealt with the carry back of a capital loss on qualifying shares crystallised in 2010/11 to the previous tax year, the Court of Appeal agreed with the Upper Tribunals decision and allowed the taxpayer’s second ground for appeal on the basis that:

  • The claim was clearly made on the 2009/10 Tax Return even though it was made in error.
  • HMRC could only enquire into the claim by opening an enquiry into the 2009/10 Tax Return and they were Out of time to do so.
  • HMRC could not enquire into the 2010/11 return as the claim was made outside of that return.

The Supreme Court agreed with the Court of Appeal; the erroneous entry of the loss relief claim in the 2009/10 return, which Mr Derry was not entitled to make in that year’s return, did not form part of that tax return for enquiry purposes and HMRC could only open an enquiry into the claim, not the return.

The SC judges considered that the provisions of ITA 2007 which create a clear and self-contained code for the treatment of a claim to share-loss relief, take precedence over the provisions of TMA 1970, which deal with claims made outside of a return and upon which HMRC sought to rely to support their enquiry into the 2009/10 return.


This is another example of a part of the tax legislation which causes much confusion amongst taxpayers and advisers alike; what is the correct mechanism for making claims when relief is being carried back to previous years and when and how can HMRC enquire into those claims.

Links to our guides:

Loss relief (income tax) disposal of shares

Discovery assessment and time limits

Loss relief: loans and shares

External link:

R (on the application of Derry) v HMRC [2019] UKSC 19