PAYE coding - losses accruing to Lloyd's underwriter - amendment of coding to make provisional allowance for prospective loss not permitted

Blackburn (Inspector of Taxes) v Keeling: CA (Lord Phillips of Worth Matravers, Master of the Rolls, Lord Justice Waller and Lord Justice Carnwath): 21 August 2003

In February 2002 the taxpayer, a Name at Lloyd's, sought entitlement to loss relief in respect of his underwriting activities under section 380(1) of the Income and Corporation Taxes Act 1988.

He requested that the loss be set against his pension income for 2002/03 by amendment of his PAYE code for that year.

The tax inspector refused the request on the basis that the expected losses would not be declared until May 2003 and thus they were to be treated as losses for 2003/04.

General commissioners allowed the taxpayer's appeal, holding that regulation 7 of the Income Tax (Employments) Regulations 1993 (SI 1993/744), gave them a discretion to direct amendment of the code to make provisional allowances for prospective losses.

The judge dismissed the Inland Revenue's appeal.

The Inland Revenue appealed.

David Ewart (instructed by the Solicitor, Inland Revenue) for the Inland Revenue; Giles Goodfellow QC (instructed by Gregory Rowcliffe Milners) for the taxpayer.

Held, allowing the appeal, that the effect of regulation 7(2)(a) was to restrict relief to losses to which a taxpayer 'was entitled for the year in which the code is determined'; that the effect of that provision was not to confer a discretion on either the Inland Revenue or the commissioners to make provisional allowance for prospective losses in preparing a taxpayer's coding; and that the losses had to be treated as losses for 2003/04 and not, by amendment of his tax coding, as allowable for 2002/03.