top of page

C3: Claims to recover overpaid direct tax

Right to make a claim

 

"(1)     This paragraph applies where—

(a)     a person has paid an amount by way of income tax or capital gains tax but the person believes that the tax was not due, or

(b)     a person has been assessed as liable to pay an amount by way of income tax or capital gains tax, or there has been a determination or direction to that effect, but the person believes that the tax is not due.

(2)     The person may make a claim to the Commissioners for repayment or discharge of the amount." (TMA 1970, Sch 1AB, para 1(1))

For corporation tax see FA 1998, Sch 18, para 51(1) to the same effect.

Tax includes amount paid under contract settlement

"(1)     In paragraph 1(1)(a), the reference to an amount paid by way of income tax or capital gains tax includes an amount paid under a contract settlement in connection with income tax or capital gains tax believed to be due from any person." (TMA 1970, Sch 1AB, para 8(1))

" “contract settlement” means an agreement made in connection with any person's liability to make a payment to the Commissioners under or by virtue of an enactment" (TMA 1970, Sch 1AB, para 8(7))

For corporation tax see FA 1998, Sch 18, para 51G(1) to the same effect.

Amounts paid on behalf of another

"(7)     For the purposes of this Schedule, an amount paid by one person on behalf of another is treated as paid by the other person." (TMA 1970, Sch 1AB, para 1(7))

For corporation tax see FA 1998, Sch 18, para 51(1) to the same effect.

One person (P) accountable for tax payable by another (T): T is claimant

"(1)     Sub-paragraph (2) applies where, under a relevant enactment, a person (“P”) is accountable to the Commissioners for—

(a)     an amount representing income tax or capital gains tax that is or is estimated to be payable by another person (“T”), or

(b)     any other amount that, under a relevant enactment, has been or is to be set off against a liability of T.

(2)     A claim under this Schedule in respect of the amount may be made only by T." (TMA 1970, Sch 1AB, para 4(1) - (2))

For corporation tax see FA 1998, Sch 18, para 51C to the same effect.

PAYE and CIS that was not due: payer is claimant

"(3)     Sub-paragraph (4) applies where—

(a)     a person (“P”) has paid an amount described in sub- paragraph (1)(a) or (b) in the belief that P was accountable to the Commissioners for the amount under a relevant enactment, but

(b)     P was not so accountable.

(4)     A claim under this Schedule in respect of the amount may be made only by P.

[...]

(6)     “Relevant enactment” means—

(a)     PAYE regulations,

(b)     Chapter 3 of Part 3 of the Finance Act 2004 or regulations under that Chapter (construction industry scheme), or

(c)     any other provision of or made under the Taxes Acts."(TMA 1970, Sch 1AB, para 4(3), (4), (6))

For corporation tax see FA 1998, Sch 18, para 51BA to the same effect in respect of CIS

Claim can be refused if amount has been repaid or credited to taxpayer

"(5)     The Commissioners are not liable to give effect to a claim under sub-paragraph (4) if or to the extent that the amount has been repaid to T or set against amounts payable to the Commissioners by T." (TMA 1970, Sch 1AB, para 4(5))

Partnerships: claim must be made by nominated partner

"(1)     This paragraph applies where—

(a)     a trade, profession or business is carried on by two or more persons in partnership,

(b)     an amount is paid, or liable to be paid, by one or more of those persons in accordance with a self-assessment, and

(c)     the amount is excessive by reason of a mistake in a partnership return.

(2)     A claim under this Schedule in respect of the amount—

(a)     may be made by the relevant partner nominated to make the claim by all of the relevant partners, and

(b)     may not be made by any other person.

(3)     In relation to such a claim, references in this Schedule to the claimant are to any of the relevant partners." (TMA 1970, Sch 1AB, para 5(1) - (3))

For corporation tax see FA 1998, Sch 18, para 51D to the same effect.

Relevant partners

"(4)     “Relevant partner” means—

(a)     a person who was a partner in the partnership at any time during the period in respect of which the partnership return was made, or

(b)     the personal representative of such a person." (TMA 1970, Sch 1AB, para 5(4))

Contract settlement of tax due from another

"(2)     Sub-paragraphs (3) to (6) apply if the person who paid the amount under the contract settlement (“the payer”) and the person from whom the tax was due (“the taxpayer”) are not the same person.

 

(3)     In relation to a claim under this Schedule in respect of that amount—

(a)     the references to the claimant in paragraph 2(5) to (7) (Cases D, E and F) have effect as if they included the taxpayer,

(b)     the references to the claimant in paragraph 2(8) and (10) (Cases G and H) have effect as if they were references to the taxpayer,

(c)     the references to the claimant in paragraphs 6(1)(b) and 7(1)(b) have effect as if they were references to the taxpayer, and

(d)     references to tax in Schedule 1A (as it applies to a claim under this Schedule) include such an amount.

 

(4)     Sub-paragraph (5) applies where the grounds for giving effect to a claim by the payer in respect of the amount also provide grounds for a discovery assessment or determination on the taxpayer in respect of any chargeable period.

 

(5)     The Commissioners may set any amount repayable to the payer by virtue of the claim against any amount payable by the taxpayer by virtue of the assessment or determination.

 

(6)     The obligations of the Commissioners and the taxpayer are discharged to the extent of any set-off under sub-paragraph (5)." (TMA 1970, Sch 1AB, para 8(2) - (7))

For corporation tax see FA 1998, Sch 18, para 51G to the same effect.

Right to make a claim

Exclusive procedure

 

"(6)     The Commissioners are not liable to give relief in respect of a case described in sub-paragraph (1)(a) or (b) except as provided—

(a)     by this Schedule and Schedule 1A (following a claim under this paragraph), or

(b)     by or under another provision of the Income Tax Acts or an enactment relating to the taxation of capital gains." (TMA 1970, Sch 1AB, para 1(6))

For corporation tax see FA 1998, Sch 18, para 51(6) to the same effect.

“In my judgment, the authorities give clear guidance that if Parliament creates a right which is inconsistent with a right given by the common law, the latter is displaced. By "inconsistent", I mean that the statutory remedy has some restriction in it which reflects some policy rule of the statute which is a cardinal feature of the statute. In those circumstances, the likely implication of the statute, in the absence of contrary provision, is that the statutory remedy is an exclusive one… Undoubtedly, Mr Monro paid money under mistake of law, and a remedy at common law in general exists in that situation. Such a right can, however, be excluded by express words or necessary implication. In this case, the implication arises because Parliament has created a specific remedy with a limitation to exclude payments made under generally accepted practice. That limitation would be defeated if the court permitted an action to be brought at common law. That principle applies even though the statute is a taxing statute which must be interpreted so as not to impose burdens on the taxpayer unfairly. I have already discussed the obvious purpose of subs (2A). It would make a nonsense of that purpose if it was possible to bring an action at common law for the recovery of money in circumstances where s 33(1) applies.” (Monro v. HMRC [2008] EWCA Civ 306, §§22…23).

But on unrelated appeal taxpayer can claim relief for overpayment in same return

 

“It seems right that if HMRC put the correctness of one aspect of a tax return in issue, they must accept that the taxpayer can counter by proving (if he can) that another aspect of the same tax return was unduly favourable to HMRC, even if the taxpayer would be out of time to make a stand-alone correction under s 9ZA.  That must be especially the case here, where the dividends and benefit in kind were an issue in the appeal in any event, at least in respect of 2010 and 2011.” (Vowles v. HMRC [2017] UKFTT 704 (TC), §163, Judge Mosedale).
 

Exclusive procedure

Form of claim

 

Cases finding that HMRC have properly prescribed a form

"[56] It was [HMRC's] submission that the required “form” was set out in HMRC’s Self Assessment Claims Manual (“SACM”), at chapter SACM12150; this is headed “overpayment relief”.  The Tribunal agrees: it is clear from SACM12005 that by “overpayment relief”, HMRC means claims made for the repayment of tax in accordance with Sch 1AB. 

[57] SACM12150 is headed “Form of claims” and includes the following text:

“Overpayment relief claims must be made in writing and

·      must clearly state that the person is making a claim for overpayment relief

·      identify the tax year or accounting period for which the overpayment or excessive assessment has been made

·      state the grounds on which the person considers that the overpayment or excessive assessment has occurred

·      state whether the person has previously made an appeal in connection with the payment or the assessment

·      if the claim is for repayment of tax, you must have documentary proof of the tax deducted or suffered in some other way as you may be required to provide this at a later date - see SACM3015

·      include a declaration signed by the claimant stating that the particulars given in the claim are correct and complete to the best of their knowledge and belief

·      state the amount that the person believes they have overpaid.” (Phelan v. HMRC [2023] UKFTT 29 (TC), Judge Redston)

“HMRC’s Self Assessment Claims Manual (SACM) at paragraph 12150 which says overpayment relief claims must be made in writing and (relevantly) must:

(1) clearly state that the person is making a claim for overpayment relief
(2) identify the tax year … for which the overpayment or excessive assessment has been made
(3) state the grounds on which the person considers that the overpayment or excessive assessment has occurred
(4)  state whether the person has previously made an appeal in connection with the payment or the assessment
(5) include a declaration signed by the claimant stating that the particulars given in the claim are correct and complete to the best of their knowledge and belief
(6) state the amount that the person believes they have overpaid.

SACM 12150 also says that if the claim is for repayment of tax, the claimant (“you”) must have documentary proof of the tax deducted or suffered.” (Dugan v. HMRC [2016] UKFTT 618 (TC), §117).

“It seems to me, however, that HMRC had prescribed a particular form for claims made under paragraph 51 Schedule 18 FA 1998 in Revenue & Customs Brief 22/10.” (Spring Capital Ltd v. HMRC [2015] UKFTT 0066 (TC), §269).

However:

"[110] HMRC submit that the Appellant has not made a valid claim as this must be made in the manner set out in HMRC’s “Employer Further Guide to PAYE and NICs” (CWG2 (2012)). This sets out detailed guidance on how an employer should operate PAYE and deduction of NICs. Ms Brown took us to Section 9 and the following sections of that document which related to mistakes in the amount of NICs or PAYE deducted during the year or after the end of the year.

[111] First, these rules seem to apply where PAYE and NICs are properly deductible by the employer and the provisions referred to relate to correcting “mistakes”. The Appellant’s case is that the PAYE and NICs are not due, so CWG2 would not be relevant.

[112] In any event, CWG2 is not statutory. It is HMRC’s guidance. Schedule 1AB is of general application and in the present case we must consider whether its requirements have been satisfied. Paragraph 1(1)(a) of Schedule 1AB applies where a person has paid an amount by way of income tax but the person believes the tax was not due. This is the Appellant’s case.  By paragraph 1(2), the person may make a claim to the Commissioners for repayment of the amount.

[113] Under paragraph 3, a claim must be made within four years of the end of the relevant tax year. Paragraph 3(2) applies in the present case so that the “relevant” tax year is the year in respect of which the payment was made which is 2012/13. This means that a claim must be made, at the latest, by 5 April 2017.

[114] In our view, the claim does not need to be in any particular form, but a claim must have been made and it must have been made by 5 April 2017." (Prisma Recruitment Limited v. HMRC [2023] UKFTT 291 (TC), Judge McKeever)

Form of claim

- Must state it is a claim for overpayment, quantify the claim and include a declaration of correctness

 

[58] Mr Phelan denied that he was making a claim for “overpayment relief”, but we find that this was because he did not understand the applicable statutory provisions.  We agree with Ms Davies that he was making such a claim.

[...]

[61]  It follows from the above that Mr Phelan’s letter of 12 March 2017 was not a valid in-time claim for a repayment of income tax because:

(1)          he did not quantify the amount of relief he was claiming, as required by TMA s 42(1A) and by SACM12150 (which applies by virtue of TMA Sch 1A, para 2(3));

(2)          it did not explicitly state that Mr Phelan was making a claim for “overpayment relief”, as required by SACM12150; and

(3)          he did not provide a signed declaration that the particulars given in the claim were correct and complete to the best of his knowledge and belief, as also required by SACM12150.

[62] Since the letter of 12 March 2017 was not a valid in-time claim for a repayment, and as the four year time limit had expired on 5 April 2017, Mr Phelan is out of time to make a claim for income tax repaid." (Phelan v. HMRC [2023] UKFTT 29 (TC), Judge Redston)

- Must state it is a claim for overpayment, quantify the claim and include a declaration of correctness

Do not include in a return

"(4)     A claim under this Schedule may not be made by being included in a return under section 8, 8A or 12AA of this Act.

(5)     Sub-paragraph (1) is subject to paragraph 3A." (TMA 1970, Sch 1AB, para 3(4) - (5))

"(4)     A claim under paragraph 51 may not be made by being included in a company tax return." (FA 1998, Sch 18, para 51B(4))

- Do not include in a return

Grounds for refusing a claim

 

"(1)     The Commissioners are not liable to give effect to a claim under this Schedule if or to the extent that the claim falls within a case described in this paragraph (see also paragraphs 3A and 4(5)" (TMA 1970, Sch 1AB, para 2(1))

For corporation tax see FA 1998, Sch 18, para 51A(1) to the same effect.

Cases not mutually exclusive: claim can be refused if any ground applies

"[75] The Cases are not mutually exclusive. HMRC are not be liable to give effect to a claim where more than one Case applies. HMRC are not liable to give effect to a claim if at least one Case applies." (Smith Homes 9 Limited v. HMRC [2022] UKFTT 5 (TC), Judge McKeever)

Grounds for refusing a claim

Ground A: mistakes in making or failing to make claim, election etc. 

 

"(2) Case A is where the amount paid, or liable to be paid, is excessive by reason of—

(a)     a mistake in a claim, election or notice,

(b)     a mistake consisting of making or giving, or failing to make or give, a claim, election or notice,

(c)     a mistake in allocating expenditure to a pool for the purposes of the Capital Allowances Act or a mistake consisting of making, or failing to make, such an allocation, or

(d)     a mistake in bringing a disposal value into account for the purposes of that Act or a mistake consisting of bringing, or failing to bring, such a value into account." (TMA 1970, Sch 1AB, para 2(2))

For corporation tax see FA 1998, Sch 18, para 51A(2) to the same effect.

"(2)     Case A is where the amount paid, or liable to be paid, is excessive by reason of—

(a)     a mistake in a claim or election, or

(b)     a mistake consisting of making or giving, or failing to make or give, a claim or election." (FA 2003, Sch 10, para 34A(2))

Claim validly refused because it could have been in return

"[112] It is of the very essence of a self-assessment system that tax effects can be undone by administrative failure. Mr Thomas correctly pointed out that, in other contexts where SDLT reliefs were available such as s.58D or 62 of FA 2003, the relevant facts would be known at the effective date of the transaction (and so a return could include a claim for relief). That may be so; but it does not follow that merely meeting the conditions for the relief is enough to secure that the taxpayer actually gets the relief. The relief requires a claim; and if the claim is not made in the return, the taxpayer will not get it. And nor can para. 34 of Sch.10 to FA 2003 (as it currently stands) ride to the taxpayer’s rescue in such a case: see para. 34A(2)(b)." (HMRC v. Candy [2021] UKUT 170 (TCC), Mellor J and Judge Andrew Scott)

"[81] I consider that the appellant’s failure to make a claim for MDR which it could have made in a return falls within Case A of paragraph 34A so, on that basis also, HMRC is not liable to give effect to the overpayment relief claim.

[82] This is entirely consistent with the scheme of the SDLT legislation. The legislation provides a relief where multiple dwellings are acquired and sets out mandatory requirements, including time limits for the relief to be claimed. The appellant cannot circumvent those requirements by submitting a repayment claim under paragraph 34. The provisions of paragraph 34A mean that HMRC is not bound to give effect to the claim in these circumstances." (Smith Homes 9 Limited v. HMRC [2022] UKFTT 5 (TC), Judge McKeever)

Claim for overpayment relief not to be used to circumvent time limits for claiming reliefs

“[48] I have found that no claim for overpayment relief was made but I also consider that even if a specific claim for overpayment of SDLT had been made in relation to the claim for multiple dwellings relief that the legislation is clear that HMRC would not be liable to give effect to that claim. This follows logically; it would be inconsistent with the aims of the legislation if a twelve month time limit could circumvented simply by describing a claim for relief as a claim for a refund of an overpayment.” (Secure Service v HMRC [2020] UKFTT 59, Judge Fairpo)

Ground A: mistakes in making or failing to make claim, election etc. 

Ground B: relief available by other means

 

"(3) Case B is where the claimant is or will be able to seek relief by taking other steps under the Income Tax Acts or an enactment relating to the taxation of capital gains." (TMA 1970, Sch 1AB, para 2(3))

 

For corporation tax see FA 1998, Sch 18, para 51A(3) to the same effect.

"(3)     Case B is where the claimant is or will be able to seek relief by taking other steps under this Part of this Act." (FA 2003, Sch 10, para 34A(3))

Ground B: relief available by other means

Ground C: claimant ought reasonably to have sought other relief within a period that has expired

 

"(4) Case C is where the claimant—

(a)     could have sought relief by taking such steps within a period that has now expired, and

(b)     knew, or ought reasonably to have known, before the end of that period that such relief was available." (TMA 1970, Sch 1AB, para 2(4))

For corporation tax see FA 1998, Sch 18, para 51A(4) to the same effect.

"(4)     Case C is where the claimant—

(a)     could have sought relief by taking such steps within a period that has now expired, and

(b)     knew, or ought reasonably to have known, before the end of that period that such relief was available." (FA 2003, Sch 10, para 34A(4))

Burden on HMRC

“We consider that if HMRC wish to rely on Case C, it is for them to prove on the balance of probabilities that Ms Sehgal knew or ought reasonably to have known by 4 May 2008 that she had made an overpayment.  We find that HMRC have not proved this fact. We therefore would not have dismissed the appeal on this ground if we had found that there had indeed been an overpayment of CGT.” (Sehgal v. HMRC [2013] UKFTT 673 (TC), §35).
 

Substantial information available on HMRC website that taxpayer ought to have read

"Given the amount of information and guidance available on HMRC’s website and the Appellant’s status as a business engaged in the construction industry, in my view, even if the Appellant did not know about the relief, it ought reasonably to have known about it. Accordingly, Case C applies so that HMRC are not liable to give effect to the repayment claim." (Smith Homes 9 Limited v. HMRC [2022] UKFTT 5 (TC), Judge McKeever)

Exception for tax due under s.28C determination which it would be unconscionable not to repay

See below.

Ground C: claimant ought reasonably to have sought other relief within a period that has expired

Ground D: claim made on grounds that have been relied on during an appeal

 

"(5) Case D is where the claim is made on grounds that—

(a)     have been put to a court or tribunal in the course of an appeal by the claimant relating to the amount paid or liable to be paid, or

(b)     have been put to Her Majesty's Revenue and Customs in the course of an appeal by the claimant relating to that amount that is treated as having been determined by a tribunal (by virtue of section 54 (settling of appeals by agreement))." (TMA 1970, Sch 1AB, para 2(5))

For corporation tax see FA 1998, Sch 18, para 51A(5) to the same effect.

"(5)     Case D is where the claim is made on grounds that—

(a)     have been put to a court or tribunal in the course of an appeal by the claimant relating to the amount paid or liable to be paid, or

(b)     have been put to Her Majesty's Revenue and Customs in the course of an appeal by the claimant relating to that amount that is treated as having been determined by a tribunal (by virtue of paragraph 37 (settling of appeals by agreement))." (FA 2003, Sch 10, para 34A(5))

Ground D: claim made on grounds that have been relied on during an appeal

Ground E: claim made on grounds that should have been relied on during an appeal

 

"(6)     Case E is where the claimant knew, or ought reasonably to have known, of the grounds for the claim before the latest of the following—

(a)     the date on which an appeal by the claimant relating to the amount paid, or liable to be paid, in the course of which the ground could have been put forward (a “relevant appeal”) was determined by a court or tribunal (or is treated as having been so determined),

(b)     the date on which the claimant withdrew a relevant appeal to a court or tribunal, and

(c)     the end of the period in which the claimant was entitled to make a relevant appeal to a court or tribunal." (TMA 1970, Sch 1AB, para 2(6))

For corporation tax see FA 1998, Sch 18, para 51A(6) to the same effect.

"(6)     Case E is where the claimant knew, or ought reasonably to have known, of the grounds for the claim before the latest of the following—

(a)     the date on which an appeal by the claimant relating to the amount paid, or liable to be paid, in the course of which the ground could have been put forward (a “relevant appeal”) was determined by a court or tribunal (or is treated as having been so determined),

(b)     the date on which the claimant withdrew a relevant appeal to a court or tribunal, and

(c)     the end of the period in which the claimant was entitled to make a relevant appeal to a court or tribunal." (FA 2003, Sch 10, para 34A(6))

Ground E: claim made on grounds that should have been relied on during an appeal

Ground F: claim is to recover amount paid in consequence of enforcement proceedings

 

"(7)     Case F is where the amount in question was paid or is liable to be paid—

(a)     in consequence of proceedings enforcing the payment of that amount brought against the claimant by Her Majesty's Revenue and Customs, or

(b)     in accordance with an agreement between the claimant and Her Majesty's Revenue and Customs settling such proceedings." (TMA 1970, Sch 1AB, para 2(7))

For corporation tax see FA 1998, Sch 18, para 51A(7) to the same effect.

"(7)     Case F is where the amount in question was paid or is liable to be paid—

(a)     in consequence of proceedings enforcing the payment of that amount brought against the claimant by Her Majesty's Revenue and Customs, or

(b)     in accordance with an agreement between the claimant and Her Majesty's Revenue and Customs settling such proceedings." (FA 2003, Sch 10, para 34A(7))

Exception for tax due under s.28C determination which it would be unconscionable not to repay

See below.

Ground G: mistake in accordance with the practice generally prevailing

 

"(8)     Case G is where—

(a)     the amount paid, or liable to be paid, is excessive by reason of a mistake in calculating the claimant's liability to income tax or capital gains tax (other than a mistake in a PAYE assessment or PAYE calculation), and

(b)     liability was calculated in accordance with the practice generally prevailing at the time." (TMA 1970, Sch 1AB, para 2(8))

For corporation tax see FA 1998, Sch 18, para 51A(8) to the same effect.

"(8)     Case G is where—

(a)     the amount paid, or liable to be paid, is excessive by reason of a mistake in calculating the claimant's liability to tax, and

(b)     liability was calculated in accordance with the practice generally prevailing at the time." (FA 2003, Sch 10, para 34A(8))

Exception for claims based on EU law

"(9A)     Cases G and H do not apply where the amount paid, or liable to be paid, is tax which has been charged contrary to EU law.

(9B)     For the purposes of sub-paragraph (9A), an amount of tax is charged contrary to EU law if, in the circumstances in question, the charge to tax is contrary to—

(a)     the provisions relating to the free movement of goods, persons, services and capital in Titles II and IV of Part 3 of the Treaty on the Functioning of the European Union, or

(b)     the provisions of any subsequent treaty replacing the provisions mentioned in paragraph (a)."  (TMA 1970, Sch 1AB, para 2(9A) - (9B))

For corporation tax see FA 1998, Sch 18, para 51A(9) - (10) to the same effect.

For SDLT see FA 2003, Sch 10, para 34A(9) - (10) to the same effect.

Ground F: claim is to recover amount paid in consequence of enforcement proceedings
Ground G: mistake in accordance with the practice generally prevailing

Ground H: mistakes relating to PAYE in accordance with the practice generally prevailing

 

"(9)     Case H is where—

(a)     the amount paid, or liable to be paid, is excessive by reason of a mistake in a PAYE assessment or PAYE calculation, and

(b)     the assessment or calculation was made in accordance with the practice generally prevailing at the end of the period of 12 months following the tax year for which the assessment or calculation was made." (TMA 1970, Sch 1AB, para 2(9))

Exception for claims based on EU law

See Ground G, above. 

Meaning of PAYE assessment and PAYE calculation

 

"(10)     For the purposes of Cases G and H—

(a)     “PAYE assessment” means an assessment on the claimant made in accordance with section 709 of ITEPA 2003 (assessment in connection with PAYE deductions), and

(b)     “PAYE calculation” means a calculation of the amount of a deduction or repayment made or to be made under PAYE regulations in respect of tax estimated to be payable by the claimant." (TMA 1970, Sch 1AB, para 2(10))

Ground H: mistakes relating to PAYE in accordance with the practice generally prevailing

Time limit: 4 years

 

Income tax and CGT

"(1)     A claim under this Schedule may not be made more than 4 years after the end of the relevant tax year." (TMA 1970, Sch 1AB, para 3(1))

 

Relevant tax year: amount paid but not due

"(2)     In relation to a claim made in reliance on paragraph 1(1)(a), the relevant tax year is—

(a)     where the amount paid, or liable to be paid, is excessive by reason of a mistake in a return or returns under section 8, 8A or 12AA of this Act, the tax year to which the return (or, if more than one, the first return) relates, and

(b)     otherwise, the tax year in respect of which the payment was made." (TMA 1970, Sch 1AB, para 3(2))

 

Relevant tax year: assessed for an amount that was not due

"(3)     In relation to a claim made in reliance on paragraph 1(1)(b), the relevant tax year is[—

(a)     where the amount liable to be paid is excessive by reason of a mistake in a return or returns under section 8, 8A or 12AA, the tax year to which the return (or, if more than one, the first return) relates, and

(b)     otherwise, the tax year to which the assessment, determination or direction relates." (TMA 1970, Sch 1AB, para 3(3))

Exception for tax due under s.28C determination which it would be unconscionable not to repay

See below.

Corporation tax

"(1)     A claim under paragraph 51 may not be made more than 4 years after the end of the relevant accounting period." (FA 1998, Sch 18, para 51B(1))

 

Relevant accounting period: amount paid but not due

"(2)     In relation to a claim made in reliance on paragraph 51(1)(a), the relevant accounting period is—

(a)     where the amount paid, or liable to be paid, is excessive by reason of a mistake in a company tax return or returns, the accounting period to which the return (or, if more than one, the first return) relates, and

(b)     otherwise, the accounting period in respect of which the amount was paid." (FA 1998, Sch 18, para 51B(2))

 

Relevant accounting period: assessed for an amount that was not due

"(3)     In relation to a claim made in reliance on paragraph 51(1)(b), the relevant accounting period is—

(a)     where the amount liable to be paid is excessive by reason of a mistake in a company tax return or returns, the accounting period to which the return (or, if more than one, the first return) relates, and

(b)     otherwise, the accounting period to which the assessment, determination or direction relates." (FA 1998, Sch 18, para 51B(3))

 

Time limit: 4 years

FTT has no jurisdiction to extend time limit

 

"[64]  Ms Davies said that this was not possible, because the Court of Appeal had confirmed in HMRC v Raftopoulou [2018] EWCA Civ 818 that the Tribunal has no jurisdiction to allow a person to make late claims.  We agree with Ms Davies.  In Raftopoulou, the Court considered whether TMA s 118(2) gave the Tribunal the relevant jurisdiction (no other provision having been identified) and Richards LJ, giving the only judgment with which Arden LJ agreed, roundly rejected that submission.  He said at [70] that Parliament had instead “created a specific statutory procedure for the extension of certain…time limits where it has considered it appropriate”.   No such specific statutory extension applies to the time limits at issue in Mr Phelan’s case." (Phelan v. HMRC [2023] UKFTT 29 (TC), Judge Redston)

FTT has no jurisdiction to extend time limit

Special rules for tax due under s.28C determination which it would be unconscionable not to repay

"(1)     This paragraph applies where—

(a)     a determination has been made under section 28C of an amount that a person is liable to pay by way of income tax or capital gains tax, but the person believes the tax is not due or, if it has been paid, was not due,

(b)     relief would be available under this Schedule but for the fact that—

(i)     the claim falls within Case C (see paragraph 2(4)),

(ii)     the claim falls within Case F(a) (see paragraph 2(7)(a)), or

(iii)     more than 4 years have elapsed since the end of the relevant tax year (see paragraph 3(1)), and

(c)     if the claim falls within Case F(a), the person was neither present nor legally represented during the enforcement proceedings in question.

 

(2)     A claim under this Schedule for repayment or discharge of the amount may be made, and effect given to it, despite paragraph 2(4), paragraph 2(7)(a) or paragraph 3(1), as the case may be.

(3)     But the Commissioners are not liable to give effect to a claim made in reliance on this paragraph unless conditions A, B and C are met."  (TMA 1970, Sch 1AB, para 3A(1) - (3))

For corporation tax see FA 1998, Sch 18, para 51BA to the same effect.

 

Condition A: unconscionable not to repay

(4)     Condition A is that in the opinion of the Commissioners it would be unconscionable for the Commissioners to seek to recover the amount (or to withhold repayment of it, if it has already been paid)."  (TMA 1970, Sch 1AB, para 3A(4))

Unconscionable means completely unreasonable


“"Unconscionable" is not defined in the statute.  In Currie it was accepted as meaning "unreasonably excessive" or "completely unreasonable".  In the bundle before this Tribunal, an extract from the Concise Oxford English Dictionary (1978 impression) defines "unconscionable" as "having no conscience; contrary to the dictates of conscience… not right or reasonable; unreasonably excessive…".  We adopt such definition.” (Montshiwa v. HMRC [2015] UKFTT 544 (TC), §31(3) , Judge Popplewell).

 

 

“The term is not statutorily defined and recourse may be had to the dictionary sense. We agree with the general meaning of the term noted in William Maxwell at para 13, viz completely unreasonable, unreasonably excessive, or (we would add) inordinate, or outrageous. We are influenced also by Judge Redston’s comments at para 95 of her decision in Donald F Currie and her references to the OED where the term is defined as meaning “not in accordance with what is right or reasonable …unreasonably excessive…grossly unfair, especially to a weaker party…acting without regard for what is right.”” (Clark v. HMRC [2015] UKFTT 324 (TC), §27).

Learning difficulties making it unconscionable

 

“Accordingly, the question of whether it was unconscionable for the respondents to refuse the appellant’s claim is to be considered against a known background of the appellant’s dyslexia, his general learning difficulties, his reliance on other family members in the absence of his wife, and the probable destruction of much of the relevant notifications from HMRC…Given that context we consider that the respondents’ refusal of the claim was unreasonable.” (Clark v. HMRC [2015] UKFTT 324 (TC), §§30…31).

 

Unreasonably excessive (disparity from amount actually due)

 

“In our view, the disparity between the sums determined and the sums due, as put to HMRC, was so striking that some further explanation and inquiry were called for. Once the point had been made, HMRC was under a duty to pay due regard to it, for instance by making inquiry so as to find out or make sure that it was adequately informed of the full facts and circumstances of Mr Scott's tax position. For example, it was open to HMRC to have responded, setting out the factual basis upon which HMRC's determination of the tax had been arrived at… In treating the matter as it did, and in failing to deal with the point about the disparity between the self-assessments and the determinations, which had been backed up with figures, HMRC failed to take account of a material factor. Its decision about whether special relief should be granted was not a rational one (in a Wednesbury sense). Its decision was therefore unreasonable in a judicial review sense.” (Scott v. HMRC [2015] UKFTT 420 (TC), §§37…41).

 

“HMRC's failure to take this information into account (they might have done so but the reasons given for their Review Letters does not evidence this) renders the decision that Contention A is not satisfied as Wednesbury unreasonable.  They have failed to take into account a hugely significant matter which they should have taken into account.  We also consider that the amount determined is manifestly excessive in relative and absolute terms and note that HMRC did not consider Tania Oxley's representations about this at all.  In our view this renders the decision so outrageous that no reasonable decision-maker could have reached it.” (Montshiwa v. HMRC [2015] UKFTT 544 (TC), §113, Judge Popplewell).

 

Tax history not relevant under Condition A

 

“Given that the three statutory conditions are separately expressed, and each must be satisfied, it seems to us that considerations about the taxpayer's history must, as a matter both of language and logic, properly fall within the exclusive scope of Condition B. Therefore, if Condition B is not in issue, then the taxpayer's history (except any previous claim for special relief) cannot properly be resuscitated or relied upon for the purposes of assessing 'conscionability' within the scope of, or for the purposes of, Condition A. Thus, the decision, in taking account of an immaterial factor, was also unreasonable in a further Wednesbury sense.” (Scott v. HMRC [2015] UKFTT 420 (TC), §43).

Illness of adviser not sufficient on its own

 

“Given the above conclusions, we are not obliged to express any concluded view as to whether the accountant's illness, without more, would have justified the claim for special relief. However, we are extremely sceptical that it would have done so. Even though he had an accountant, Mr Scott was personally responsible for making sure that his tax affairs were in order and up-to-date. On Mr Scott's own evidence, his attention to his tax affairs was far from scrupulous.” (Scott v. HMRC [2015] UKFTT 420 (TC), §45).

 

Relief not automatic even if judicial review ground made out

 

“Relief is not automatic. For example, it can be disallowed if the outcome, even had the point been considered, would have been the same. However, there is no evidence before us which would entitle us to conclude, even on the balance of probabilities, that the decision to refuse special relief would inevitably have been the same, had the point about 'unreasonably excessive' been inquired into. Nor, in fairness to HMRC, was any such outcome suggested to us on their behalf…We have considered the closely-reasoned discussion of this point in Currie, and we consider, as the Tribunal did in that case, that our jurisdiction is limited to allowing or dismissing the appeal. We cannot substitute our own view on special relief for that of the Commissioners…In consequence, we allow the appeal, with the effect that the claims to special relief for the years 2006-07 and 2007-08 must be allowed.” (Scott v. HMRC [2015] UKFTT 420 (TC), §§46 - 49).

 

“…were we to find that HMRC’s decision in this case was unreasonable, we would allow the appeal, unless we were certain that the outcome would have been the same had the Commissioners made the decision correctly on the basis of the evidence before them.” (Currie v. HMRC [2014] UKFTT 882 (TC), §43).
 

HMRC's opinion of unconscionable: appeal is supervisory

“We prefer the Currie approach for the same reasons identified in both Currie and Scott.  But it also seems right to us given that the consequence of a finding that a decision is unreasonable is that we can allow a taxpayer's appeal, (and so reduce the amount due by the amount of special relief claimed).  In these circumstances it would be unfair to HMRC to admit additional facts which were not available to the reviewing officer at the date of his decision, but which had come to light since then.  The reviewing officer's decision could then be impugned in the light of that subsequent information, and we do not think that is right, given he had no chance to consider it at the time that he came to his review decision.” (Montshiwa v. HMRC [2015] UKFTT 544 (TC), §23, Judge Popplewell).

 

“The phrase “in the opinion of the Commissioners” is a “statutory condition” as that term was understood and explained in John Dee. When the Tribunal exercises its jurisdiction in relation to an appeal against a “Condition A” decision, we are limited by that statutory condition.” (Currie v. HMRC [2014] UKFTT 882 (TC), §29(1)).

 

“Next, we have to consider the nature and scope of our jurisdiction. Judge Redston considered helpfully the nature of the decision to be made by the Tribunal in the Currie case. She suggests (at para 19) that the Tribunal is to consider whether or not HMRC’s decision was unreasonable, not to substitute its own view. We agree with this interpretation which is consistent with the reading of other similar provisions noted by her (paras 23 and 25).” (Clark v. HMRC [2015] UKFTT 324 (TC), §28).

 

“It seems to us that the approach of the Tribunal in Currie is preferable, and we adopt the same reasoning. It seems to us that the Tribunal's function in assessing conscionability should be to assess whether HMRC's opinion is 'unreasonable', as that term is understood in a judicial review sense. Not only is that consistent with the statutory language, but such an approach strikes a fair and principled balance between the interests of the taxpayer and HMRC respectively.” (Scott v. HMRC [2015] UKFTT 420 (TC), §29).

 

No new information

 

“Since this Tribunal's jurisdiction is limited to considering whether the reviewing officer's decision was unreasonable, we need to establish the information which was before that reviewing officer, and cannot take into account further evidence produced by either party at the hearing.” (Montshiwa v. HMRC [2015] UKFTT 544 (TC), §31(6) , Judge Popplewell).

Duty to give reasons

 

“Given that the definition of unconscionable means something which is unreasonably "excessive", it is our view that Parliament must have intended that the reviewing officer would give reasons as to why, in the face of a numerical disparity, he considered the excess to be a reasonable one…But this is not just a question of the appellate jurisdiction of the Tribunal; it is a matter of courtesy.  If a taxpayer provides reasons why he thinks his claim should succeed, it is, with respect to HMRC, incumbent as a matter of good (if not best) practice to address that argument and to explain, if that argument is found wanting, why that is…We also note that the Taxpayer's Charter which identifies what a taxpayer might expect from HMRC, identifies that one such expectation is that HMRC will "be professional and act with integrity" which includes the statement that HMRC will "make decisions in accordance with the law and published guidance and explain them clearly to you" (emphasis added).” (Montshiwa v. HMRC [2015] UKFTT 544 (TC), §§118…123…124, Judge Popplewell).
 

Condition B: tax affairs are or will be up to date

(5)     Condition B is that the person's affairs (as respects matters concerning the Commissioners) are otherwise up to date or arrangements have been put in place, to the satisfaction of the Commissioners, to bring them up to date so far as possible."  (TMA 1970, Sch 1AB, para 3A(5))

 

Condition C: no previous attempt at reliance on relief or exceptional circumstances

"(6)     Condition C is that either—

(a)     the person has not relied on this paragraph on a previous occasion (whether in respect of the same or a different determination or tax), or

(b)     the person has done so, but in the exceptional circumstances of the case should be allowed to do so again on the present occasion.

 

(7)     For the purposes of sub-paragraph (6)—

(a)     a person has relied on this paragraph on a previous occasion if the person has made a claim (or a composite set of claims involving one or more determinations, taxes and tax years) in reliance on this paragraph on a previous occasion, and

(b)     it does not matter whether that claim (or set of claims) succeeded."  (TMA 1970, Sch 1AB, para 3A(6) - (7))

 

Claim must include information and documentation supporting conditions being met

(8)     A claim made in reliance on this paragraph must include (in addition to anything required by Schedule 1A) such information and documentation as is reasonably required for the purpose of determining whether conditions A, B and C are met." (TMA 1970, Sch 1AB, para 3A(8))


 

Discovery assessments arising out of grounds for giving effect to claim

 

TMA 1970, Sch 1AB, paras 6 and 7 - extended time limit and relaxed procedural rules, see G3 and G4.

For corporation tax see FA 1998, Sch 18, paras 51E and 51F to the same effect.

Set off of amount due under discovery assessment or determination where overpaid tax arises out of contract settlement for tax due from another

"(4)     Sub-paragraph (5) applies where the grounds for giving effect to a claim by the payer in respect of the amount also provide grounds for a discovery assessment or determination on the taxpayer in respect of any chargeable period.

 

(5)     The Commissioners may set any amount repayable to the payer by virtue of the claim against any amount payable by the taxpayer by virtue of the assessment or determination.

 

(6)     The obligations of the Commissioners and the taxpayer are discharged to the extent of any set-off under sub-paragraph (5).

 

(7)     In this paragraph—

“contract settlement” means an agreement made in connection with any person's liability to make a payment to the Commissioners under or by virtue of an enactment;

“discovery assessment or determination” has the same meaning as in paragraph 6." (TMA 1970, Sch 1AB, para 8(2) - (7))

Special rules for tax due under s.28C determination which it would be unconscionable not to repay
Discovery assessments arising out of grounds for giving effect to claim

Overpaid IHT (claim within 4 years)

 

"(1)     If it is proved to the satisfaction of the Board that too much tax has been paid on the value transferred by a chargeable transfer or on so much of that value as is attributable to any property, the Board shall repay the excess unless the claim for repayment was made more than [four]2 years after the date on which the payment or last payment of the tax was made.

(2)     References in this section to tax include references to interest on tax." (IHTA 1984, s.241)

Overpaid IHT (claim within 4 years)

- IHT paid in accordance with prevailing view of the law: no repayment

 

"Where any payment has been made and accepted in satisfaction of any liability for tax and on a view of the law then generally received or adopted in practice, any question whether too little or too much has been paid or what was the right amount of tax payable shall be determined on the same view, notwithstanding that it appears from a subsequent legal decision or otherwise that the view was or may have been wrong." (IHTA 1984, s.255)

- IHT paid in accordance with prevailing view of the law: no repayment
bottom of page