Readers’ forum: Duty to notify HMRC of disposal loss to brother?

My client disposed of some shares at a loss in 2012-13. A calculation of the loss was included in his return for that year. No enquiry was opened.

The loss was carried forward each year until 2021-22 when it was used to offset a gain on the disposal of a property. HMRC opened an enquiry into the 2021-22 tax return and after considerable correspondence has agreed with the computation of the gain as submitted. However before closing the enquiry HMRC has now started to ask questions about the 2012-13 capital loss including details of who the shares were sold to. I have had a brief conversation with my client and he has now informed me for the first time that the 2012-13 disposal was to his brother. It is thus a connected person’s loss and can’t be set against the gain on the property disposal....