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CGT loss claims after Mansworth v Jelley - update on legitimate expectation

Following a meeting of the HMRC CGT Liaison Group meeting in November 2013 at which representative bodies requested an update of the status of Mansworth v Jelley cases under enquiry, HMRC agreed to the issue of a summary of the decision of the Personal Tax Contentious Issues Panel. This Panel is responsible for deciding HMRC's position on disputed issues affecting multiple taxpayers. The Panel has considered the use of HMRC's collection and management powers in relation to Mansworth v Jelley cases and legitimate expectation claims for losses. HMRC's summary of the background and the Panel's decision is attached.

CIOT Technical Team
30 May 2014


HMRC CGT Liaison Group Meeting
HMRC, 100 Parliament Street, Westminster, London, SW1A 2BQ
Room GE/08
10:30am – 25 November 2013

Action Point – HMRC to produce and circulate summary of PT CIP decision.

HMRC's Personal Tax Contentious Issues Panel (PTCIP) is responsible for deciding the Department's position on disputed issues affecting multiple taxpayers. More information about the operation of PTCIP can be found in Chapter 4 of The Tax Assurance Commissioner's Annual Report 2012-13.

In June 2013 PTCIP considered the question of whether HMRC could use its collection and management powers to give customers the benefit of the incorrect 2003 post-Mansworth v Jelley guidance in cases where they could make a realistic case that they relied on it to their detriment. HMRC's legal advice was that these customers did not have sufficient evidence to support their claim and would not succeed at Judicial Review. However, the lapse of time since 2003 makes evidence that much more difficult to locate and HMRC's delay in working the enquiries has contributed to this.

PTCIP agreed that in certain cases it would be appropriate for HMRC to allow the customers' claims for losses. It was expected that there would be few such cases among all those that remain unresolved. The cases would be those in which:

  • customers can make a realistic case that they relied on incorrect guidance (in practice this is a "balance of probabilities" test),
  • the customer would suffer detriment if those losses were denied by HMRC, and
  • there would have been a legitimate expectation except that HMRC's delay in working the enquiry means that the level of evidence they are now able to provide is limited (again, in practice this is a "balance of probabilities" test).

To date HMRC have agreed 3 claims which fell within the PTCIP criteria. Where caseworkers consider that the above may apply, the case will be reviewed and referred to the Business Head, Capital Gains Technical for a decision if appropriate.

Capital Gains Technical Group, HMRC
5 December 2013


Extract from minutes of meeting:

11    HMRC explained that a number of cases in which it had been suggested that there might be a legitimate expectation to losses had been referred for legal advice. One of the issues this had raised was that there were cases in which the passage of time meant that it was unlikely that sufficient evidence could now be presented to satisfy the courts. HMRC CGT specialists had asked the new Personal Tax Contentious Issues Panel (PT CIP) to consider the use of collection and management powers in such cases. PT CIP had agreed in June 2013 to the use of collection and management powers to permit relief for losses to the extent that customers could show that, on the balance of probabilities, they had relied on the 2003 guidance to their detriment and legitimate expectation could have been demonstrated at the time, but could no longer be because of delay.

12    The PT CIP decision was being communicated to caseworkers and a structure put in place for relevant cases to be escalated to Alan Welsby for decision. So far, decisions have been made to permit relief for losses in three cases. A typical case in which relief might be permitted would be where the customer:

  • claimed losses in accordance with the method of computation described in the 2003 guidance and shortly after the publication of that guidance,
  • disposed of assets at a gain shortly afterwards, in circumstances in which it could reasonably be assumed that the expectation was that the gain would be covered by those losses, and
  • could show that both events took place before the Inland Revenue had given any indication that it would challenge the losses.

13    The group asked if it would be possible for HMRC to circulate the decision of the PT CIP. HMRC agreed to produce a summary of the document for the group.

Quasi-Legal General, 02/06/2014
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