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P3: Consequential adjustments
Direct tax assessment appeal: assessment altered in accordance with FTT decision
"(6) If, on an appeal notified to the tribunal, the tribunal decides—
(a) that, the appellant is overcharged by a self-assessment;
(b) that, any amounts contained in a partnership statement are excessive; or
(c) that the appellant is overcharged by an assessment other than a self-assessment,
the assessment or amounts shall be reduced accordingly, but otherwise the assessment or statement shall stand good."
"(7) If, on an appeal notified to the tribunal, the tribunal decides
(a) that the appellant is undercharged to tax by a self-assessment
(b) that any amounts contained in a partnership statement are insufficient; or
(c) that the appellant is undercharged by an assessment other than a self-assessment,
the assessment or amounts shall be increased accordingly." (TMA 1970, s.50(6) - (7))
Overcharged includes under-assessment of amounts deducted at source repayable by HMRC
“In our view, the word “payable” in section 9(1)(b) is apt to include “repayable”. Just as “overcharge” in section 50(6)(a) includes an over-assessment under section 9(1)(b) of amounts payable (see paragraph 37 above), so too “overcharge” in section 50(6)(a) includes, in our view, an under-assessment of amounts repayable by HMRC: if a taxpayer receives less by way of repayment than he is entitled to receive, he can properly be described as having been overcharged. If it were to be suggested that the repayment is not a repayment of tax, we would disagree. What Mr Walker is entitled to is a payment of a sum of money which has been deducted from payments to him by subcontractors and which is treated as payment of income tax. Such a repayment must, we think, have the character of a repayment of tax. In any case, section 50(6)(a) does not refer to an overcharge to tax: it refers simply to overcharge by the self-assessment.” (HMRC v. Walker [2016] UKUT 32 (TCC), §40).
Taxpayer is overcharged by assessment if it is invalid
“In my view, he would be “overcharged” if an assessment was made and one of the conditions specified by the legislation for the making of that assessment was not met. The process of amending a return through the issue of closure notices is an integral part of the process of assessing and charging tax under the legislation. In that context, a taxpayer is just as much “overcharged” if an assessment is made on the taxpayer when it should not have been because a condition contained in the legislation for making the assessment has not been met as he or she would be if the tax charge contained in the assessment is not computed in accordance with the tax legislation.” (Scott v. HMRC [2017] UKFTT 385 (TC), §163, Judge Greenbank).
NICs jurisdiction same as direct tax jurisdiction
“(1) In this regulation reference to a section alone is reference to the section so numbered in the Management Act.
(2) For the purposes of these regulations, sections 49A to 49I of the Management Act shall apply to appeals with the following modifications--
(a) in section 49A(4) for "in accordance with section 54" substitute "in accordance with regulation 11 of the Social Security Contributions (Decisions and Appeals) Regulations 1999",
(b) in section 49C(4) for "agreement in writing under section 54(1)" substitute "agreement under regulation 11 of the Social Security Contributions (Decisions and Appeals) Regulations 1999",
(c) omit section 49C(5),
(d) in section 49F(2) for "agreement in writing under section 54(1)" substitute "agreement under regulation 11 of the Social Security Contributions (Decisions and Appeals) Regulations 1999",
(e) omit section 49F(3).” (SSCDAR r.7)
“If, on an appeal . . . under Part II of the Transfer Act ... that is notified to the tribunal, it appears to the Tribunal that the decision should be varied in a particular manner, the decision shall be varied in that manner, but otherwise shall stand good.” (SSCDAR r.10)
Direct tax assessment: FTT not obliged to calculate the tax
"(8) Where, on an appeal notified to the tribunal against an assessment (other than a self-assessment) which—
(a) assesses an amount which is chargeable to tax, and
(b) charges tax on the amount assessed,
the tribunal decides as mentioned in subsection (6) or (7) above, the tribunal may, unless the circumstances of the case otherwise require, reduce or, as the case may be, increase only the amount assessed; and where any appeal notified to the tribunal is so determined the tax charged by the assessment shall be taken to have been reduced or increased accordingly." (TMA 1970, s.50(8))
Direct tax partnership statement: HMRC to notify the relevant partners
"(9) Where any amounts contained in a partnership statement are reduced under subsection (6) above or increased under subsection (7) above, an officer of the Board shall by notice to each of the relevant partners amend—
(a) the partner's return under section 8 or 8A of this Act, or
(b) the partner's company tax return,
so as to give effect to the reductions or increases of those amounts." (TMA 1970, s.50(9))
Tribunal decides the issues raised, HMRC alter the assessment accordingly
“The draftsman must in my judgment have considered that any alteration of the assessment consequent on an appeal fell to be made by the assessing body and not by the appellate body. The fact that Parliament has taken the trouble to alter [TMA s.50(6)] so as to delete the express requirement that the commissioners are to alter the assessment is a clear indication that they are not the body which henceforward would be responsible for making the necessary alterations. This statutory history is wholly consistent with the conclusion that following an appeal, the necessary amendments fall to be made by the inspector or the Board as the assessing body.” (Hallamshire Industrial Finance Trust Ltd v. IRC [1979] STC 237 at 243 – at a time when appeals were to the general or special commissioners).
“The retention of s 50 in terms which closely follows that of its predecessor is a powerful indication that Parliament did not intend to change the jurisdiction of the Commissioners in as dramatic a fashion as the introduction of a system of self-assessment might have suggested…But the impact of the retention of s 50 in a form which follows closely its predecessor must not be over-emphasised. It is trite to observe that s 50 must be read in the context of the new provisions.” (HMRC v. Tower MCashback LLP 1 [2010] EWCA Civ 32, §28…29).
But a different view was taken in Silva:
“Where an appeal is determined by a hearing before the First-tier Tribunal (formerly, the Special Commissioners or General Commissioners), section 50 of the TMA provides for the Tribunal to have power to amend the partnership return and the assessed amounts.” (R (oao Silva) v. HMRC [2014] UKUT 170 (TCC) §30).
Reference to self-assessment is to a self-assessment as amended by HMRC
“It is clear that the reference in section 50(6)(a) to a self-assessment is, or at least includes, a reference to a self-assessment as amended by HMRC as the result of a closure notice. A taxpayer cannot appeal his own self-assessment; but where a closure notice results in an amended assessment showing an increase in the assessment, he is able to appeal.” (HMRC v. Walker [2016] UKUT 32 (TCC), §16, Warren J and Judge Sinfield).
HMRC error in giving effect to decision (raise at enforcement stage if necessary)
“as to the small mathematical error said to have been made in the revised assessments. So far as I can see there is nothing in the 1970 Act which prevents the taxpayer from raising the point as a defence in proceedings to recover the tax, if as seems most unlikely the Crown chooses to stand by a mathematically incorrect computation.” (Hallamshire Industrial Finance Trust Ltd v. IRC [1979] STC 237 at 243).
No power to reduce assessment below nil
“For one or more years that may result in the disputed assessment being reduced to Nil. I do not accept that the Tribunal has any power to reduce an assessment so as to produce a negative figure that can be aggregated with or netted off against assessments for other years.” (Balti Hut (Gloucester) Ltd v. HMRC [2017] UKFTT 231 (TC), §14, Judge Kempster).
No power to alter taxpayer’s own self-assessment
“I also do not accept that the Tribunal can reduce the figures given by a taxpayer as his own self-assessment; that must be done by the taxpayer himself by amending his own return pursuant to s 9ZA TMA 1970 (subject to the time limit in s 9ZA(2)). The reference in s 50(6) to an appellant being “overcharged by a self-assessment” is to cases where HMRC have amended a self-assessment; although that is not stated explicitly in the legislation, I consider it is the correct reading of that provision, and I note that a similar conclusion was reached recently by Jay J in his careful analysis of the relevant provisions in R (oao Archer) v RCC [2017] EWHC 196 (Admin) (at ⁋ 56).” (Balti Hut (Gloucester) Ltd v. HMRC [2017] UKFTT 231 (TC), §14, Judge Kempster).
Claims
“(7A) If, on an appeal notified to the tribunal, the tribunal decides that a claim or election which was the subject of a decision contained in a closure notice under section 28A of this Act should have been allowed or disallowed to an extent different from that specified in the notice, the claim or election shall be allowed or disallowed accordingly to the extent that the tribunal decides is appropriate, but otherwise the decision in the notice shall stand good.” (TMA 1970 s.50(7A)).