A taxpayer has lost her case at the Court of Appeal (CoA) where HMRC contested a decision by the Upper Tribunal (UT). The taxpayer had filed her return within the time limits but then on reflection thought she had over declared income and under declared deductible expenses. She didn’t amend her tax return within 12 months of the normal filing date, so any 31 January two years after the end of the tax year. Where a taxpayer doesn’t so amend their return, they can submit a claim but this claim has to be made within 4 years after then end of the relevant tax year.
In this case the taxpayer sent a claim after the 4-year period had ended. HMRC summarily rejected this claim with a short letter to the taxpayer stating that her claim was time barred. The question before the CoA was whether this letter from HMRC was a notice of enquiry and a closure notice in a singular document, such that it was appealable to the First-tier Tribunal (FTT). The FTT had found that the rejection letter was simply that and held that it didn’t have jurisdiction to hear the case as the letter wasn’t appealable. The taxpayer appealed the FTT decision to the UT who found in favour of the taxpayer.
The CoA has reversed the UT’s decision and reinstated the FTT decision, confirming that the rejection letter was indeed just a letter from HMRC informing the taxpayer of basic information. The CoA held that the scheme of the legislation expected certain processes to be followed such as a notice of enquiry, enquiries and then closure of those enquires. The rejection letter was in effect HMRC stating that no enquires would be opened as they were summarily rejecting the claim.
The CoA also considered whether a section in the Taxes Management Act 1970 gave further benefits to the taxpayer but the CoA found that fair construction of the section just relieved taxpayers from financial penalties where they had reasonable excuses for not meeting deadlines rather than extending time limits in general.
The decision can be found at: HM Customs and Revenue v Raftopoulou – Find case law (nationalarchives.gov.uk)
This case of course highlights that the most effective way to obtain refunds of tax from overstated prior returns is to amend the return within 12 months of the filing date but provides clarification on what correspondence from HMRC is appealable. The secondary route of making claims within 4 years of the tax year end is open but it is important not become time barred.
Please do contact us if you have any questions with self-assessment processes. We are very experienced with these matters.
