Sideways relief on losses arising in avoidance scheme

The taxpayers entered into a financial arrangement called a contract for differences (CFD) with Pendulum Investment Corporation a company incorporated in the Seychelles – a Montpelier scheme. They said they had done so in the course of a trade of dealing in derivatives and that the CFD had caused them to make a loss that could be set against their other taxable income.

HMRC refused the claims saying the taxpayers had not been carrying on a trade on a commercial basis with a view to profit. It also imposed penalties for negligent completion of their tax returns for the years in question.

The taxpayers appealed.

The First-tier Tribunal agreed with HMRC that none of the individuals had been carrying on a trade. Even if they had been it would not have been on a commercial basis or with a view to realising profits. Although the judge accepted...