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Procedure.Tax
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F4: Enquiring into claims
Direct tax claims made in a return: enquire into the return
Query whether if the claim should not have been included in the return it can be enquired into under Sch 1A
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"[68] I am not satisfied that these issues have been fully explored in argument before us, which has concentrated on the entitlement to relief rather than the means of enforcement. As has been seen, there remain unresolved uncertainties as to the correct interpretation of the entries in the on-line form and their treatment by the Revenue. In addition, we heard little discussion of the relationship of the enquiries respectively under section 9A and Schedule 1A paragraph 5. Apart from timing, I did not understand it to be suggested that there was any material difference between the processes. While it may be prudent for the Revenue to institute an enquiry under the former section, if there is any doubt about what is properly to be treated as part of the return, it does not necessarily follow that the Revenue is thereafter bound by the contents of the return for all purposes. If it later emerges that a claim was wrongly included in the return for that year (for example, because it should have been treated as subject to TMA Schedule 1B), it may at least be arguable that the Revenue should not be precluded at that later stage from opening an enquiry on the correct basis." (R (oao Derry) v. HMRC [2019] UKSC 19)
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Loss claim is part of the return even if it does not reduce tax payable in that return
"[100](1) The statutory provisions require that all allowable losses are included in a return, not simply those which are equal to, or less than, the chargeable gains.
(2) The ratio of Cotter is that HMRC are entitled to treat as irrelevant to the calculation of tax information and claims which do not and cannot as a matter of law affect the tax chargeable and payable in the relevant year of assessment. That happened in Cotter, because as a matter of law, the loss in question related to the following year. In Mr Cumming-Bruce’s case, as a matter of law, all losses had to be included in the return for the year. In any event, the claimed losses could have affected the tax chargeable for the relevant years..." (Cumming-Bruce v. HMRC [2022] UKUT 233 (TCC), Judge Thomas Scott and Judge Redston)
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Amendment of direct tax claims made outside return to correct obvious errors
"(1) Subject to sub-paragraph (2) below—
(a) at any time before the end of the period of nine months beginning with the day on which a claim is made, an officer of the Board may by notice to the claimant so amend the claim as to correct any obvious errors or mistakes in the claim (whether errors of principle, arithmetical mistakes or otherwise); and
(b) at any time before the end of the period of twelve months beginning with the day on which the claim is made, the claimant may amend his claim by notice to an officer of the Board.
(2) No amendment of a claim may be made under sub-paragraph (1) above at any time during the period—
(a) beginning with the day on which an officer of the Board gives notice of his intention to enquire into the claim, and
(b) ending with the day on which the officer's enquiries into the claim are completed." (TMA 1970, Sch 1A, para 3)
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Enquiring into direct tax claims made outside of a return
"(1) An officer of the Board may enquire into—
(a) a claim made by any person, or
(b) any amendment made by any person of a claim made by him,
if, before the end of the period mentioned in sub-paragraph (2) below, he gives notice in writing of his intention to do so to that person or, in the case of a partnership claim, any successor of that person." (TMA 1970, Sch 1A, para 5)
Notice in writing
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See F3
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Time limit
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"(2) The period referred to in sub-paragraph (1) above is whichever of the following ends the latest, namely—
(a) the period ending with the quarter day next following the first anniversary of the day on which the claim or amendment was made;
(b) where the claim or amendment relates to a year of assessment, the period ending with the first anniversary of the 31st January next following that year; and
(c) where the claim or amendment relates to a period other than a year of assessment, the period ending with the first anniversary of the end of that period;
and the quarter days for the purposes of this sub-paragraph are 31st January, 30th April, 31st July and 31st October." (TMA 1970, Sch 1A, para 5(2))
One enquiry per claim or amendment
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(3) A claim or amendment which has been enquired into under sub-paragraph (1) above shall not be the subject of—
(a) a further notice under that sub-paragraph; or
(b) if it is subsequently included in a return, a notice under section 9A(1) or 12AC(1) of this Act or paragraph 24 of Schedule 18 to the Finance Act 1998." (TMA 1970, Sch 1A, para 5(3))
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Defective notice of enquiry
See A4: Defective form and errors
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Enquiry notice erroneously saying it was enquiring into non-existent amendment to return rather than claim: saved
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"[28] The appellant submits that the fact that the enquiry purported to be an enquiry into a nonexistent amendment to the taxpayer’s SDLT return and the fact that it was issued under the wrong statutory provision are errors which are too fundamental to be cured by section 83 Finance Act 2003.
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[41] Having considered section 83 Finance Act 2003, which had not previously been drawn to my attention, and in the light of Raftopoulou and Ladson, I am of the view that section 83 applies in the present case. Apart from the erroneous reference to the amendment of an SDLT return, the enquiry letter was in substantial conformity with the requirements of the 2003 Act. It was clear that the letter was opening an enquiry and that the enquiry concerned SDLT. It contained the correct details of the purchaser, the land concerned, the date of the acquisition and the Unique Transaction Reference Number.
[42] I also consider that the intended effect of the 1 January 2019 letter was reasonably ascertainable by Cornerstone, to whom it was directed, as the appellant’s agent..." (Smith Homes 9 Limited v. HMRC [2022] UKFTT 5 (TC), Judge McKeever)
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Closing enquiry into claim made outside of a return
(1) An enquiry under paragraph 5 above is completed when an officer of the Board by notice (a “closure notice”) informs the claimant that he has completed his enquiries and states his conclusions.
(2) In the case of a claim for discharge or repayment of tax, the closure notice must either—
(a) state that in the officer's opinion no amendment of the claim is required, or
(b) if in the officer's opinion the claim is insufficient or excessive, amend the claim so as to make good or eliminate the deficiency or excess.
In the case of an enquiry falling within paragraph 5(1)(b) above, paragraph (b) above only applies so far as the deficiency or excess is attributable to the claimant's amendment.
(3) In the case of a claim that is not a claim for discharge or repayment of tax, the closure notice must either—
(a) allow the claim, or
(b) disallow the claim, wholly or to such extent as appears to the officer appropriate.
(4) A closure notice takes effect when it is issued.
[...]
(8) In relation to a partnership claim, references in this paragraph to the claimant are to the person who made the claim or his successor." (TMA 1970, Sch 1A, para 7(1) - (4), (8))
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Application for closure notice
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"(5) The claimant may apply to the tribunal for a direction requiring an officer of the Board to issue a closure notice within a specified period.
(6) Any such application is to be subject to the relevant provisions of Part 5 of this Act (see, in particular, section 48(2)(b)).
(7) The tribunal shall give the direction applied for unless satisfied that there are reasonable grounds for not issuing a closure notice within a specified period." (TMA 1970, Sch 1A, para 7(5) - (7))
Giving effect to amendments
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"(1) An officer of the Board or the Board shall, within 30 days after the date of issue of a closure notice amending a claim other than a partnership claim under paragraph 7(2) above, give effect to the amendment by making such adjustment as may be necessary, whether—
(a) by way of assessment on the claimant, or
(b) by discharge of tax or, on proof to the satisfaction of the officer or the Board that any tax has been paid by the claimant by deduction or otherwise, by repayment of tax.
(2) An officer of the Board or the Board shall, within 30 days after the date of issue of a closure notice amending a partnership claim under paragraph 7(2) above, give effect to the amendment, as respects each of the relevant partners, by making such adjustment as may be necessary, whether—
(a) by way of assessment on the partner, or
(b) by discharge of tax or, on proof to the satisfaction of the officer or the Board that any tax has been paid by the partner by deduction or otherwise, by repayment of tax.
(3) An assessment made under sub-paragraph (1) or (2) above shall not be out of time if it is made within the time mentioned in that sub-paragraph." (TMA 1970, Sch 1A, para 8)
Appeal against amendments within 30 days
"(1) An appeal may be brought against—
(a) any conclusion stated or amendment made by a closure notice under paragraph 7(2) above, or
(b) any decision contained in a closure notice under paragraph 7(3) above.
(1A) Notice of the appeal must be given—
(a) in writing,
(b) within 30 days after the date on which the closure notice was issued,
(c) to the officer of the Board by whom the closure notice was given.
(2) Where, in the case of such an appeal, the issues arising include—
(a) any question arising under section 278 of the principal Act or section 56 or 460 of ITA 2007 (residence etc of claimants);
(b) any question of residence, ordinary residence or domicile; or
(c) the question whether a fund is one to which section 615(3) of the principal Act applies (pension funds for service abroad),
the time for bringing the appeal shall be three months from the date mentioned in sub-paragraph (1A)(b) above.
(3) In the case of an appeal against an amendment made by a closure notice under paragraph 7(2) above, if an appeal is notified to the tribunal under section 49D, 49G or 49H, the tribunal may vary the amendment appealed against whether or not the variation is to the advantage of the appellant.
(4) Where any such amendment is varied, whether by HMRC or by the tribunal or by the order of any court, paragraph 8 above shall (with the necessary modifications) apply in relation to the variation as it applied in relation to the amendment.
(5) If, on an appeal notified to the tribunal, the tribunal decides that a claim which was the subject of a decision contained in a closure notice under paragraph 7(3) above should have been allowed or disallowed to an extent different from that specified in the notice, the claim shall be allowed or disallowed accordingly to the extent that appears appropriate, but otherwise the decision in the notice shall stand good." (TMA 1970, Sch 1A, para 8)
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For taxpayer to justify claim for repayment where HMRC raise inquiry
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"[75] As Auld J said in L Rowland & Co (Retail) Ltd, and the FtT Judge said at paragraph [156] of her decision, it is for the taxpayer to justify, or cause to be justified, his claim for repayment once the Commissioners have raised an inquiry with him about it..." (Bollinway Properties Limited v. HMRC [2023] UKUT 295 (TCC) Richard Smith J and Judge Mandalia)
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