Daarasp – Loss Claims Denied As Closure Notices Were Valid

In Daarasp LLP & Betex LLP v HMRC [2021] UKUT 0087, the Upper Tribunal (UT) upheld the First-tier Tribunal's (FTT) decision and dismissed the taxpayers' claims for losses as the conclusions in HMRC's closure notices were not inconsistent with the losses being reduced to zero in the taxpayers' returns.

Background 

Daarasp LLP and Betex LLP (the Appellants) were formed in order to participate in an arrangement which was intended to produce trading losses in respect of the acquisition of certain software licences. The aim was for the Appellants to sustain a first-year loss equivalent to the capital allowances claimed under section 45, Capital Allowances Act 2001 (CAA 2001), in respect of the expenditure on the software licences. The individual members of the Appellants would then seek to claim income tax loss relief in respect of their respective shares of the Appellants' first year losses.