Graham Davis v The Commissioners for HMRC
Decision date: 15 August 2022
Neutral citation: [2022] UKFTT 274 (TC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
This appeal concerned whether Mr Graham Davis could set off sole trader losses against income from USL Securities Ltd under ITA 2007 s.86 following incorporation. The Tribunal found there was no transfer of a trade from Mr Davis to USL and that the shares were subscribed for in cash, not allotted as consideration for a transfer of trade, so s.86 did not apply. The appeal was dismissed and s.86 relief denied for 2016/17 and 2017/18.
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: high
For s.86 relief after incorporation to apply, there must be a transfer of a trade to the company and the consideration for that transfer must be wholly or mainly shares allotted as consideration to the transferor; a mere "right to carry on a business" without transfer of identifiable assets, customers, goodwill or other indicia does not suffice.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The Tribunal indicated that a purposive (Ramsay-style) approach cannot displace clear statutory conditions in s.86 where the facts do not fit the statutory description. It also noted that whether the losses were post-cessation rather than carried-forward trading losses was not decided as that issue was unnecessary to dispose of the appeal.