Claims involving two or more years: how relief is claimed and for what year?
Normally, claims have to be made
- in a return, or
- by an amendment to a return
- where a notice to file a return has been issued for the year in question.
However, paragraph 2(2) of Schedule 1B lifts this restriction and the claim can be made in a return or outside a return where it affects more than one year. This usually allows the customer to make the claim at an early date and before the notice to file a return is issued for the relevant year.
Claims should be made in writing and should state:
- The year of the claim
- The amount of the loss or the relief
- The year to which the loss is being carried back (for some claims, the legislation may dictate this).
It would help HMRC process the claim if it also stated the legislation under which it is being made.
To what year does the claim relate?
Paragraph 2(3) Schedule 1B says that the claim shall relate to the later year and so the earlier year is unaffected. For example:
Mary has a trading loss of £20,000 for the accounting period ended on 30 September 2005.
She wishes to carry back the loss, under ICTA88/S380, to the earlier year. The claim is for a 2005-06 loss as the loss arose in that year and it will be carried back to 2004-05.
This point was established in the case of Norton v Thompson (SpC399) where the taxpayer had contended that the claim had the affect of re-opening the earlier year and reducing the tax payable for the earlier year.
This means that the tax due for each year can be ascertained with certainty, on the basis of the events of that year, and is not contingent on later events arising in later years.