Alison Foster QC has successfully represented the HMRC in the case of R (on the application of De Silva and another) v Commissioners for Her Majesty’s Revenue and Customs as judgment was handed down in the Supreme Court on Wednesday 15th November 2017.
The appellants are two taxpayers who invested in and became limited partners of various partnerships in implementation of marketed tax avoidance schemes. The schemes were aimed at accruing substantial trading losses through investment in films. The partnerships claimed that they had suffered such losses in several tax years and claimed relief for film expenditure by taking advantage of tax incentives under section 42 of the Finance (No 2) Act 1992.
HMRC did not accept the partnerships claims for relief and initiated enquiries into their tax returns under section 12AC(1) of the Taxes Management Act 1970 (“TMA”). HMRC disallowed the partnerships’ claims for expenditure funded by non-recourse or limited recourse loans to individual partners and also expenditure paid as fees to the promoters of the schemes.
The appellants raised judicial review proceedings against HMRC’s decisions which were set out in the letters. They assert that HMRC was entitled to enquire into their claims only under Schedule 1A to the TMA and that, because the statutory time limit for such an enquiry had expired, the appellants’ claims to carry back the partnership losses in full had become unchallengeable. The Upper Tribunal rejected the appellants’ claim. The Court of Appeal dismissed their appeal. The appellants appealed to the Supreme Court.
The Supreme Court unanimously dismissed the appeal.
To read the full judgment, please click here.