top of page

5. Content and submission of a return

The regime before self-assessment (relevant when considering older cases) 

 

“Prior to 1996-1997 an Inspector or the Board had the power to make an assessment or make an assessment in a further amount in cases where profits which ought to have been assessed had not been assessed, and an assessment to tax was or became insufficient or any relief given was or became excessive (s 29(3)(a)-(c)). That power could be limited if an appeal had been settled by agreement pursuant to s 54 in relation to the same year of assessment, expressly or impliedly covering the point in issue...Subject to any appeal, the Inspector's assessment was the final determination of a taxpayer's liability to tax for the year in question (s 50(6)). As I have already remarked, under this statutory scheme the submission of a tax return did not itself determine the taxpayer's legal liability to tax or to relief. Further, no tax became due and payable until after the assessment had been made.” (HMRC v. Tower MCashback LLP 1 [2010] EWCA Civ 32, §§13...15).
 

The regime before self-assessment

Form of self-assessment return

 

HMRC power to prescribe form of return

​

"(1)     Any returns under the Taxes Acts shall be in such form as the Board prescribe, and in prescribing income tax forms under this subsection the Board shall have regard to the desirability of securing, so far as may be possible, that no person shall be required to make more than one return annually of the sources of his income and the amounts derived therefrom." (TMA 1970, s.113(1))

​

Self-assessment cannot be made outside of return

 

“In this respect a company tax return must comply with specific requirements and the self-assessment included in the return must be the outcome of the computation specified in paragraph 8 of Schedule 18 based on the information contained in the return.  There is nothing in Schedule 18 to suggest that a self-assessment can be in some other form and submitted outside the return.  The delivery of the return for a period (and the assessment that it must contain) ordinarily starts time running by reference to which HMRC must give a notice of enquiry (see paragraph 24(2)). This can scarcely be by reference to a letter that on its face denies that it is the very thing that it has to be.” (Bloomsbury Verlag GmbH v. HMRC [2015] UKFTT 660 (TC), §90).

​

Document purporting to be a return will be a return unless omissions are serious

 

“Whether a return sent to the respondents pursuant to a notice served under section 8 of the 1970 Act, does or does not amount to a tax return within the meaning of that statutory provision must be a matter of fact and degree. It cannot be open to the respondents to reject a return simply because it contends that there may be some detail lacking from it, which might automatically give rise to penalties being incurred, unless the omissions are, as a matter of fact and degree, so serious as to allow it to be said that the return is not, in reality, a return in respect of the matters which the notice served under section 8 of the 1970 Act required to be returned.” (Pidgeon v. HMRC [2017] UKFTT 438 (TC), §17, Judge Geraint Jones QC).
 

Form of self-assessment return

Electronic lodgement of tax returns

​

See TMA 1970, s.115A and Schedule 3A.

​

Electronic lodgement of tax returns

Voluntary returns may be treated as returns for certain purposes

​

Personal, trustee and partnership tax returns

"(1)     This section applies where—

(a)     a person delivers a purported return (“the relevant return”) under section 8, 8A or 12AA (“the relevant section”) for a year of assessment or other period (“the relevant period”),

(b)     no notice under the relevant section has been given to the person in respect of the relevant period, and

(c)     HMRC treats the relevant return as a return made and delivered in pursuance of such a notice.

 

(2)     For the purposes of the Taxes Acts—

(a)     treat a relevant notice as having been given to the person on the day the relevant return was delivered, and

(b)     treat the relevant return as having been made and delivered in pursuance of that notice (and, accordingly, treat it as if it were a return under the relevant section).

 

(3)     “Relevant notice” means—

(a)     in relation to section 8 or 8A, a notice under that section in respect of the relevant period;

(b)     in relation to section 12AA, a notice under section 12AA(3) requiring the person to deliver a return in respect of the relevant period, on or before the day the relevant return was delivered (or, if later, the earliest day that could be specified under section 12AA)." (TMA 1970, s.12D(1) - (3))

​

Company tax returns

"(1)     This paragraph applies where—

(a)     a company delivers a purported return (“the relevant return”) for a period (“the relevant period”),

(b)     no notice under paragraph 3 has been given to the company in respect of the relevant period, and

(c)     Her Majesty's Revenue and Customs treats the relevant return as a return made and delivered in pursuance of such a notice.

 

(2)     For the purposes of the Taxes Acts—

(a)     treat a relevant notice as having been given to the company on the day the relevant return was delivered, and

(b)     treat the relevant return as having been made and delivered in pursuance of that notice (and, accordingly, treat it as if it were a company tax return under paragraph 3).

 

(3)     “Relevant notice” means a notice under paragraph 3 requiring the company to deliver a return for the relevant period." (FA 1998, Sch 18, para 20A(1) - (3))

​

Purported return

​

"(4)     In subsection (1)(a) “purported return” means anything that—

(a)     is in a form, and is delivered in a way, that a corresponding return could have been made and delivered had a relevant notice been given, and

(b)     purports to be a return under the relevant section." (TMA 1970, s.12D(4))

​

FA 1998, Sch 18, para 20A(4) is materially identical.

​

No effect on time limits for assessments

​

"(5)     Nothing in this section affects sections 34 to 36 or any other provisions of the Taxes Acts specifying a period for the making or delivering of any assessment (including self-assessment) to income tax or capital gains tax." (TMA 1970, s.12D(5)).

​

"(5)     Nothing in this paragraph affects paragraph 46 or any other provisions of the Taxes Acts specifying a time limit for the making of an assessment." (FA 1998, Sch 18, para 20A(5))

​

Enquiry notices and closure notices validated 

​

"[43] The FTT considered the Section 12D Issue at [32] – [77] of the Decision. It concluded that s 12D did have the effect of retrospectively validating the notices of enquiry and the closure notices. In particular:

(1) The purpose of s 12D was clear. It was to codify a previous policy of HMRC to treat voluntary returns as valid and as having been made pursuant to a notice under s 8 TMA 1970. The Explanatory Notes to the Finance (No 3) Bill 2018 and extracts from Hansard did not assist in resolving the issue (see [43] and [47].

(2) Section 12D was expressed to apply “for the purposes of the Taxes Act” and by s 87(3) FA 2019 was treated as always having been in force. It was clearly designed to give certainty to taxpayers and HMRC that the process of assessment encompassing enquiry notices and closure notices in relation to voluntary returns would be respected (see [55] – [60]).

(3) It was a deeming provision and its scope fell to be construed in accordance with the decision in Marshall v Kerr [1994] STC 638. Validation of the enquiry notices and closure notices inevitably flowed from the deemed state of affairs (see [62]).

(4) This interpretation did not give rise to any injustice or absurdity (see [63] – [75]).

[44] The submissions before us were in large measure a rehearsal of the submissions made to the FTT. For the reasons which follow we are satisfied that there was no error of law in the FTT’s conclusion." (Allam v. HMRC [2021] UKUT 291 (TCC), Edwin Johnson J and Judge Cannan)

​

Previous case law

​

This provision overrules the previous case law that a voluntary return was not a return (and could not be the subject of an enquiry) and does so with retrospective effect. See Patel v. HMRC [2018] UKFTT 185 (TC) and Bloomsbury Verlag GmbH v. HMRC [2015] UKFTT 660 (TC).

Voluntary returns may be treated as returns for certain purposes

Composition of personal tax return

 

"(1)     For the purpose of establishing the amounts in which a person is chargeable to income tax and capital gains tax for a year of assessment, and the amount payable by him by way of income tax for that year, he may be required by a notice given to him by an officer of the Board—

(a)     to make and deliver to the officer, a return containing such information as may reasonably be required in pursuance of the notice, and

(b)     to deliver with the return such accounts, statements and documents, relating to information contained in the return, as may reasonably be so required.

​

(1AA)     For the purposes of subsection (1) above—

(a)     the amounts in which a person is chargeable to income tax and capital gains tax are net amounts, that is to say, amounts which take into account any relief or allowance a claim for which is included in the return; and

(b)     the amount payable by a person by way of income tax is the difference between the amount in which he is chargeable to income tax and the aggregate amount of any income tax deducted at source." (TMA 1970, s.8(1) - (1AA))

​

Not just the amounts chargeable to tax but information for the purpose of establishing those amounts

​

"[23]...It is noteworthy that under subsection (1)(a) the information which is required is not simply the amounts in which the person is chargeable to income tax and the amounts payable by him for the year of assessment but information “for the purpose of establishing” those amounts. That information includes the person’s share of partnership income or losses for the period which falls within the year of assessment ..." (R (oao De Silva) v. HMRC [2017] UKSC 74)

​

Declaration that information etc. is correct and complete

​

"(2)     Every return under this section shall include a declaration by the person making the return to the effect that the return is to the best of his knowledge correct and complete." (TMA 1970, s.8(2))

​

Not declaring that return is absolutely correct

​

“The declaration that the person signing the company tax return is required to give is that the return is correct and complete “to the best of [his]/[her] knowledge and belief”.  That statement does not require the signatory to certify that the return is absolutely correct.  It simply requires that person to complete the return with the best information that is available.  If the position is uncertain, the person who completes the return can identify that uncertainty to HMRC and will not be regarded as making a false statement by doing so (see Goulding J in Dunk v General Commissioners for Havant and others [1976] STC 460n).” (AEI Group Ltd v. HMRC [2015] UKFTT 290 (TC), §74).

​

Must include self assessment unless submitted before 31 October

​

"(1)     Subject to subsections (1A) and (2), every return under section 8 or 8A of this Act shall include a self-assessment, that is to say—

(a)     an assessment of the amounts in which, on the basis of the information contained in the return and taking into account any relief or allowance a claim for which is included in the return, the person making the return is chargeable to income tax and capital gains tax for the year of assessment; and

(b)     an assessment of the amount payable by him by way of income tax, that is to say, the difference between the amount in which he is assessed to income tax under paragraph (a) above and the aggregate amount of any income tax deducted at source

but nothing in this subsection shall enable a self-assessment to show as repayable any income tax treated as deducted or paid by virtue of section  246D(1) of the principal Act, section 626 of ITEPA 2003 or section 399(2) or 530(1) of ITTOIA 2005

 

(1A)     The tax to be assessed on a person by a self-assessment shall not include any tax which—

(a)     is chargeable on the scheme administrator of a registered pension scheme under Part 4 of the Finance Act 2004,

(aa)     is chargeable, on the scheme manager of a qualifying recognised overseas pension scheme or a former such scheme, under Part 4 of the Finance Act 2004,

(ab)     is chargeable on the sub-scheme administrator of a sub-scheme under Part 4 of the Finance Act 2004 as modified by the Registered Pensions (Splitting of Schemes) Regulations 2006, or

(b)     is chargeable on the person who is (or persons who are) the responsible person in relation to an employer-financed retirement benefits scheme under section 394(2) of ITEPA 2003.

 

(2)     A person shall not be required to comply with subsection (1) above if he makes and delivers his return for a year of assessment—

(a)     on or before the 31st October next following the year, or

(b)     where the notice under section 8 or 8A of this Act is given after the 31st August next following the year, within the period of two months beginning with the day on which the notice is given." (TMA 1970, s.9(1) - (2))

​

Self-assessment is integral part of return

 

“In these circumstances (and leaving aside the irrelevant exception in s.9(2)) a taxpayer would not in my judgment properly comply with a notice under s.8(1) if the return filed was non-compliant with s.9 by reason of the absence of a self-assessment. By the same token, a taxpayer is not in my view rendered immune from the risk of a penalty under s.93 by filing a return which is noncompliant in that respect, for liability under s.93 arises where a taxpayer ‘fails to comply with the [s.8] notice.’ ” (R (oao Higgs) v. HMRC [2015] UKUT 92 (TCC), §37, Barling J).

 

Self-assessment cannot be made outside of return

​

“In this respect a company tax return must comply with specific requirements and the self-assessment included in the return must be the outcome of the computation specified in paragraph 8 of Schedule 18 based on the information contained in the return.  There is nothing in Schedule 18 to suggest that a self-assessment can be in some other form and submitted outside the return.  The delivery of the return for a period (and the assessment that it must contain) ordinarily starts time running by reference to which HMRC must give a notice of enquiry (see paragraph 24(2)). This can scarcely be by reference to a letter that on its face denies that it is the very thing that it has to be.” (Bloomsbury Verlag GmbH v. HMRC [2015] UKFTT 660 (TC), §90).
 

Failure to include self-assessment: HMRC assessment treated as self-assessment

​

(3)     Where, in making and delivering a return, a person does not comply with subsection (1) above, an officer of the Board shall if subsection (2) above applies, and may in any other case—

(a)     make the assessment on his behalf on the basis of the information contained in the return, and

(b)     send him a copy of the assessment so made;

(3A)     An assessment under subsection (3) above is treated for the purposes of this Act as a self-assessment and as included in the return." (TMA 1970, s.9(3))

​

Accompanying documents are part of the return

 

“I have already concluded that the information contained in the letter dated 30 August 2006 and its accompanying documents are to be seen as part of the return.” (Spring Salmon & Seafood Ltd v. HMRC [2014] UKUT 488 (TCC), §43 – a letter was sent enclosing short form tax returns, financial statements and a corporation tax computation).

 

Persons employed in the UK by non-UK residents: details of general earnings may be required

 

"(4A)     Subsection (4B) applies if a notice under this section is given to a person within section 8ZA of this Act (certain persons employed etc by person not resident in United Kingdom who perform their duties for UK clients).

(4B)     The notice may require a return of the person's income to include particulars of any general earnings (see section 7(3) of ITEPA 2003) paid to the person." (TMA 1970, s.8(4A) - (4B))

​

"(1)     For the purposes of section 8(4A) of this Act, a person (“F”) is within this section if each of conditions A to C is met.

(2)     Condition A is that F performs in the United Kingdom, for a continuous period of 30 days or more, duties of an office or employment.

(3)     Condition B is that the office or employment is under or with a person who—

(a)     is not resident in the United Kingdom, but

(b)     is resident outside the United Kingdom.

(4)     Condition C is that the duties are performed for the benefit of a person who—

(a)     is resident in the United Kingdom, or

(b)     carries on a trade, profession or vocation in the United Kingdom." (TMA 1970, s.8ZA)

 

Composition of personal tax return

Composition of partnership returns

 

"(1)     Where a trade, profession or business is carried on by two or more persons in partnership, for the purpose of facilitating the establishment of the following amounts, namely—

(a)     the amount in which each partner chargeable to income tax for any year of assessment is so chargeable and the amount payable by way of income tax by each such partner, and

(b)     the amount in which each partner chargeable to corporation tax for any period is so chargeable,

an officer of the Board may act under subsection (2) or (3) below (or both).

(1A)     For the purposes of subsection (1) above—

(a)     the amount in which a partner is chargeable to income tax or corporation tax is a net amount, that is to say, an amount which takes into account any relief or allowance for which a claim is made; and

(b)     the amount payable by a partner by way of income tax is the difference between the amount in which he is chargeable to income tax and the aggregate amount of any income tax deducted at source." (TMA 1970, s.12AA(1) - (1A))

​

(7)     Every return under this section shall also include, if the notice under subsection (2) or (3) above so requires—

(a)     with respect to any disposal of partnership property during a period to which the return relates, the like particulars as if the partnership were liable to tax on any chargeable gain accruing on the disposal." (TMA 1970, s.12AA(7))

​

Partnership returns to include statement of partners and declaration of correctness

 

“(6) Every return under this section shall include--
(a) a declaration of the name, residence and tax reference of each of the persons who have been partners--
(i) for the whole of the relevant period, or
(ii) for any part of that period,
and, in the case of a person falling within sub-paragraph (ii) above, of the part concerned; and
(b) a declaration by the person making the return to the effect that it is to the best of his knowledge correct and complete.” (TMA 1970, s.12AA(6)).

​

“(10) In this section "residence", in relation to a company, means its registered office.” (TMA 1970, s.12AA(10)).

 

Exception for overseas partners in investment partnership in certain circumstances

​

"(1)     There is no requirement for a partnership return to include a declaration of the tax reference of a person (see section 12AA(6)(a)) if—

(a)     the person is not chargeable to income tax or corporation tax for the period, or for a period which includes any part of the period, in respect of which the partnership return is made,

(b)     the partnership does not carry on a trade or profession or a UK property business at any time during the period in respect of which the partnership return is made,

(c)     the whole of that period is a period in respect of which the partnership is required to set out information about the person in one or more relevant returns, and

(d)     the partnership return includes a statement that the condition in paragraph (c) is met.

(2)     In subsection (1)(c) “relevant return” means a return under the International Tax Compliance Regulations 2015 (S.I. 2015/878).

(3)     If, in reliance on this section, the partnership return does not include a declaration of the tax reference of a person but the partnership does not comply with the requirement mentioned in subsection (1)(c), the partner required to make and deliver the partnership return, or that partner's successor, must give notice to HMRC specifying the tax reference.

(4)     The notice must be given within the period of 12 months beginning with the filing date for the partnership return." (TMA 1970, s.12ABZA(1) - (4))

​

Partnership return to include partnership statement

 

“(1) Every partnership return shall include a statement (a partnership statement) of the following amounts, namely--
(a) in the case of the period in respect of which the return is made and each period of account ending within that period,--
(i) the amount of income or loss from each source which, on the basis of the information contained in the return and taking into account any relief or allowance a section 42(7) claim for which is included in the return, has accrued to or has been sustained by the partnership for the period in question,
(ia) the amount of the consideration which, on that basis, has accrued to the partnership in respect of each disposal of partnership property during that period,
(ii) each amount of income tax which, on that basis, has been deducted or treated as deducted from any income of the partnership, or treated as paid on any such income, for that period, and
(iii) the amount of each tax credit which, on that basis, has accrued to the partnership for that period, and
(b) in the case of each such period as is mentioned in paragraph (a) above and each of the partners, the amount which, on that basis and (where applicable) taking into account any such relief or allowance, is equal to his share of that income, loss, consideration, tax or credit.” (TMA 1970, s.12AB)

 

Income means profit

 

“A partnership statement is a statement under section 12AB TMA 1970 which must include the “amount of income or loss [which] has accrued to or has been sustained by the partnership …” together with the amount equal to each partner’s “share of that income [or] loss …”. It seems to us that the reference here to partnership income is plainly intended to refer to a partnership’s trading profits and the individual partners’ shares of those profits.” (Huitson v. HMRC [2015] UKFTT 448 (TC), §87).

 

Amounts arising from another partnership treated as from a separate source

 

"(1A)     Where at any time in a period mentioned in subsection (1)(a) the reporting partnership is a partner in another partnership which carries on a trade, profession or business—

(a)     income or loss that the reporting partnership accrues or sustains thereby is to be treated for the purposes of subsection (1)(a)(i) as from a source that is separate from any of its other sources of income or loss,

(b)     consideration in respect of the disposal of partnership property that the reporting partnership accrues thereby is to be treated for the purposes of subsection (1)(a)(ia) as from a source that is separate from any of its other sources of consideration,

(c)     income tax which has been deducted or treated as deducted from, or paid on, any income that the reporting partnership accrues thereby is to be treated for the purposes of subsection (1)(a)(ii) as being deducted or treated as deducted from, or paid on, a source of income that is separate from any of its other sources of income, and

(d)     amounts specified in the partnership statement under subsection (1)(a) must include—

(i)     each amount which is stated to be equal to the reporting partnership's share of income, loss, consideration or tax in any partnership statement made under this section in relation to the other partnership for the period for which the return is made or a period which includes that period or any part of it, and

(ii)     a statement as to which of the assumptions in subsection (1B) was applied in calculating that amount." (TMA 1970, s.12AB(1A)).

​

Look through partners who are partnerships for reporting purposes

​

"(1B)     If at any time in a period mentioned in subsection (1)(a) the reporting partnership includes a partner which is itself a partnership (“the participating partnership”), the amounts referred to in subsection (1)(b) must be calculated and included in the partnership statement applying each of the following assumptions to the participating partnership—

(a)     that it is a UK resident individual;

(b)     that it is a non-UK resident individual;

(c)     that it is a UK resident company;

(d)     that it is a non-UK resident company.

 

(1C)     But subsection (1D) applies if the partnership return includes—

(a)     the name of every person who was an indirect partner in the reporting partnership at any time in a period mentioned in subsection (1)(a), and

(b)     at least some of the following information—

(i)     whether a person named under paragraph (a) is an individual, company or partnership (or something else),

(ii)     in the case of such a person who is an individual, whether the individual was or was not resident in the United Kingdom in the year of assessment for which the partnership return is made, and

(iii)     in the case of such a person who is a company, whether the company was or was not resident in the United Kingdom for each accounting period of the company which includes all, or any part of, a period mentioned in subsection (1)(a).

 

(1D)     In subsection (1B)—

(a)     ignore either or both of paragraph (a) and (b) if it is apparent from information provided under subsection (1C) that none of the indirect partners of the reporting partnership is a person of a description specified in that paragraph at any time in the year of assessment for which the return is made, and

(b)     ignore either or both of paragraph (c) and (d) if it is apparent from that information that none of the indirect partners is a company of a description specified in that paragraph at any time in any of its accounting periods which include all, or any part of, a period mentioned in subsection (1)(a)." (TMA 1970, s.12AB(1B) - (1D)).

 

Composition of partnership returns
Composition of partners' personal returns

Composition of partners' personal returns

​

Partners’ personal returns to include information from partnership tax return

 

“(1B) In the case of a person who carries on a trade, profession, or business in partnership with one or more other persons, a return under this section shall include each amount which, in any relevant statement, is stated to be equal to his share of any income, loss, tax, credit or charge for the period in respect of which the statement is made.
(1C) In subsection (1B) above "relevant statement" means a statement which, as respects the partnership, falls to be made under section 12AB of this Act for a period which includes, or includes any part of, the year of assessment or its basis period.” (TMA 1970 s.8(1B) – (1C)).

​

- Partners’ personal returns to include information from partnership tax return

- Partners who disagree with partnership return (2018/19 onwards): refer to Tribunal within 12 months

​

"(1)     A partnership return is conclusive for tax purposes as to—

(a)     whether a person does or does not have a share in the profits or losses of the partnership for any period, and

(b)     what the share of any person in those profits or losses is.

(2)     That applies even where the person would not otherwise be chargeable to tax on profits of the partnership.

(3)     If there is a dispute between the person mentioned in subsection (1)(a) or (b) and any one or more partners in the partnership about whether what is given in a partnership return is correct as to the matters mentioned in that subsection, a party to the dispute may refer it to the tribunal for determination." (s.12ABZB(1) - (3))

​

Does not apply to dispute as to the partnership's profit or loss

​

"(4)     That does not include a dispute to the extent that it is in substance about the amount (before sharing) of the partnership's profits or losses for a period." (s.12ABZB(4))

​

"[42] In essence this issue concerns whether the dispute between the parties was “in substance” about the nature of the Additional Payment, ie whether it was a profit share (as contended by PwC) or compensation (as contended by Mr Anderson), or about the amount (before sharing) of the partnership’s profits.

[43] [The taxpayer] says that the dispute is essentially about the nature of the Additional Payment. However, he accepts that, as payment of compensation is an expense deductible in computing profit, it does have a “knock on” effect on the amount of partnership profits. [PWC], with whom [HMRC] agrees, contends that because of that effect on the amount of partnership profits the dispute is, in substance, directly about the amount of partnership profits.

[44] Although initially attracted by the argument advanced by [the Taxpayer], on balance, given the potential effect of any determination by the Tribunal on the partnerships profit, I agree with [PWC] that the dispute is, in substance, about the amount of the partnership’s profits whether directly, as PwC and HMRC contend, or indirectly, as [the Taxpayer] accepts. This is apparent from the description of the dispute at paragraph 5 of the Referral itself (see paragraph 14, above) from which the issue to be determined by the Tribunal if the Referral were to be admitted is whether the Additional payment is as “a matter of fact a share of profit”.

[45] Accordingly the Tribunal is precluded from admitted the Referral, which is “in substance” about the amount of the partnerships profits, by s 12ABZB(4)." (Anderson v. PWC v. HMRC [2022] UKFTT 457 (TC), Judge Brooks)

​

Time limit for referral: 12 months from delivery of return or amendment

​

"(5)     A referral under subsection (3) must be made before the end of the period of 12 months beginning with the day after—

(a)     the day on which the partnership return was delivered, or

(b)     if the dispute relates to an amendment to the return made under section 12ABA (amendment of partnership return by taxpayer), the day on which the amendment was made." (s.12ABZB(5))

​

Time limit runs from when return delivered to HMRC

​

"[38] However, rather then engage in the gymnastics required for Mr Whiscombe’s construction of s 12ABZB, I prefer that advanced by PwC and HMRC (which Mr Whiscombe also accepts as being the more natural and obvious interpretation) that the use of “delivered” in s 12ABZB(5) refers to the partnership return being delivered to HMRC. Such a construction is, in my judgment, clearly consistent with the TMA provisions regarding the filing of a partnership tax return." (Anderson v. PWC v. HMRC [2022] UKFTT 457 (TC), Judge Brooks)

​

No extensions

​

"[30] However, I do not agree. As [the partnership] submits, not only is the view expressed by the Upper Tribunal, which is not supported by any reasoning, obiter and therefore not binding, rule 5(3)(a) and rule 21 are silent as to the existence of any exception. Moreover, if the Upper Tribunal in VK were right it would render the restriction in rule 5(3)(a), “unless such extension … would conflict with the provision of another enactment setting down a time limit” otiose.

[31] It therefore follows that as an extension of time would conflict with a provision of another enactment, namely s 12ABZB(5), the Tribunal does not have the power under rule 5(3)(a) to grant an extension of time to make a referral under s 12ABZB(3) with the result that any referral that is not made in time “must not” be admitted." (Anderson v. PWC v. HMRC [2022] UKFTT 457 (TC), Judge Brooks)

​

Notice of referral to be given to HMRC and other partners

​

"(6)     Where a dispute is referred to the tribunal under subsection (3)—

(a)     the party referring it must at the same time give notice of the referral to—

(i)     HMRC, and

(ii)     the reporting partner, and

(b)     the reporting partner must give notice of the referral to—

(i)     every other partner in the partnership, and

(ii)     any other person appearing to the reporting partner to be a party to the dispute.

But notice need not be given under this subsection to anyone who referred the dispute." (s.12ABZB(6))

​

Tribunal to determine correct position

​

"(7)     Where the tribunal determines that what is given in the partnership return as to the matters referred to in subsection (1)(a) or (b) is not correct—

(a)     the tribunal must determine what the return should have given, and

(b)     HMRC must amend the return accordingly.

(8)     Where a partnership return is amended under subsection (7)(b), HMRC must by notice to any party to the proceedings or any partner in the partnership amend—

(a)     their return under section 8 or 8A of this Act, or

(b)     their company tax return,

if the amendments are necessary to give effect to the consequences of the amendment of the partnership return." (s.12ABZB(7) - (8))

​

Agreement reached by all partners to have effect subject to notice of disagreement

​

"(9)     Where at any time after a referral is made under subsection (3) but before the tribunal determines the dispute the reporting partner gives notice to HMRC that all the partners in the partnership (whether or not party to the proceedings) have agreed in writing that the partnership return—

(a)     is correct without variation, or

(b)     requires correcting in a particular manner,

the like consequences shall ensue for all purposes as would have ensued if, at the time the agreement was made, the tribunal had determined the dispute in accordance with the terms of the agreement.

(10)     Subsection (9) does not apply if—

(a)     within the period of 30 days beginning with the date of the agreement, a party to the agreement gives notice to the other parties to the agreement that the party wishes to repudiate or resile from the agreement, or

(b)     within the period of 30 days beginning with the date on which it receives notice of the agreement, HMRC gives notice to the reporting partner of its objection to the agreement." (s.12ABZB(9) - (10))

​

Only one referral (unless return amended)

​

"(11)     A partnership return which has been the subject of a referral under subsection (3) may not be the subject of another referral under that subsection, unless that other referral—

(a)     relates to a dispute arising in consequence of an amendment of the partnership return under section 12ABA (amendment of partnership return by taxpayer), and

(b)     is the first referral following the amendment." (s.12ABZB(11))

 

- Partners who disagree with partnership return (2018/19 onwards): refer to Tribunal within 12 months

- Partners who disagree with partnership return (pre-2018/19): return what partner believes is correct

​

“Following the Morgan and Self cases, we take the view that partners should normally resolve between themselves any dispute about the allocation of profits. But, in exceptional cases, where there is a genuine disagreement that cannot be resolved between the partners, individual partners should:

 - enter, as their share of partnership profits, the amount they consider to be correct and advise us that they have done so by making an entry in the white space notes section of the return to show
- advise us that they have done so by making an entry in the white space notes section of the return to show:

 -the profits as allocated in the partnership statement,
-a deduction (or addition) of the disputed amount, and
- an explanation about why they think the profit allocated to them in the partnership statement is wrong.”
(EM7025).

​

“Therefore, despite clearly being obiter, the observations of Dr Brice on s 8 TMA in Morgan and Self were made after hearing argument on the issue from experienced leading counsel on both sides and, as such, should not be dismissed lightly. Rather, having carefully considered what she said, particularly at [74], I would adopt her reasoning and agree that the purpose of s 8 TMA is to establish the right amount of tax.” (King v. HMRC [2016] UKFTT 409 (TC), §83).

​

“Although the provisions of section 8(1)(b) and 8(1B) impose a clear statutory obligation to provide the partnership statement with the return, and to include the amounts in it in the return, those subsections have to be read within the context of the whole of section 8 which includes section 8(1)(a). It seems to me that the language of section 8(1)(a) fairly admits of the interpretation that the totality of the information referred to must ensure that the return is complete and so must include any additional information needed to supplement the partnership statement in order to comply with the purposes of the section which is to establish the right amount of tax. This would be the case both if the individual thought that the amount in the partnership statement was too high (as in this appeal) or too low, that is, if it under-stated what the individual thought was the right amount. This interpretation is also consistent with section 8(2) because the provision of the additional information would then enable the individual to declare that the return was correct and complete. The same interpretation would then carry through into section 9. Under section 9(1) the self-assessment of the individual would be on the basis of the complete information in the return including both the partnership statement and any supplementary information.” (Morgan & Self v. HMRC [2009] UKFTT 78 (TC), §74).
 

- Partners who disagree with partnership return (pre-2018/19): return what partner believes is correct

Composition of trustee's return

 

"(1)     For the purpose of establishing the amounts in which the relevant trustees of a settlement, and the settlors and beneficiaries, are chargeable to income tax and capital gains tax for a year of assessment, and the amount payable by him by way of income tax for that year, an officer of the Board may by a notice given to any relevant trustee require the trustee—

(a)     to make and deliver to the officer, on or before the day mentioned in subsection (1A) below a return containing such information as may reasonably be required in pursuance of the notice, and

(b)     to deliver with the return such accounts, statements and documents, relating to information contained in the return, as may reasonably be so required;

and a notice may be given to any one trustee or separate notices may be given to each trustee or to such trustees as the officer thinks fit." (TMA 1970 s.8A)

​

The other requirements are the same as for personal tax returns. 

​

Relevant trustees

​

See Chapter B1.

 

Composition of trustee's return

Composition of company tax return

 

Temporal scope of the return(s) required depends on the period specified in the notice

​

"(1)     A notice requiring a company tax return must specify the period to which the notice relates.

(2)     If an accounting period of the company ended during (or at the end of) the specified period, a return is required for that accounting period.

If there is more than one, a separate company tax return is required for each of them.

(3)     If sub-paragraph (2) does not apply but an accounting period of the company began during the specified period, a company tax return is required for the part of the specified period before the accounting period began.

(4)     If the company was outside the charge to corporation tax for the whole of the specified period, a company tax return is required for the whole of the specified period.

(5)     If none of the above provisions applies, no company tax return is required in response to the notice." (FA 1998, Sch 18, para 5)

​

Must include statement of correctness

 

"(3)     A company tax return must include a declaration by the person making the return that the return is to the best of his knowledge correct and complete." (FA 1998, Sch 18, para 3(3))

​

Must include everything specified in notice requiring return

​

"References in this Schedule to the delivery of a company tax return are to the delivery of all the information, accounts, statements and reports required to comply with the notice requiring the return." (FA 1998, Sch 18, para 4)

​

Limit to statutory accounts for UK companies

​

"(1)     In the case of a company which—

(a)     is required to deliver a company tax return for a period,

(b)     is resident in the United Kingdom throughout that period, and

(c)     is required under the Companies Act 2006 to prepare accounts for a period consisting of or including the whole of that period,

the power to require the delivery of accounts as part of the return is limited to such accounts, containing such information and having annexed to them such documents, as are required to be prepared under that Act.

 

(2)     Sub-paragraph (1) does not affect—

(a)     the power to require the delivery of accounts, information or documents in relation to a company's tax liability by virtue of paragraph 50 or 51 of Schedule 19 to the Finance Act 2011 (the bank levy), or

(b)     the requirements which may be imposed under paragraph 3A." (FA 1998, Sch 18, para 11)

​

HMRC published requirements relating to accounts etc. to be complied with

​

"(1)     Her Majesty's Revenue and Customs may from time to time publish requirements as to the information, accounts, statements and reports which a company must deliver as part of its company tax return where the company has a tax liability by virtue of paragraph 50 or 51 of Schedule 19 to the Finance Act 2011 (the bank levy); and such information, accounts, statements and reports must be delivered as if the notice to the company under paragraph 3(1) had required them to be delivered (and paragraph 4 is to be read accordingly).

 

(2)     The publication of any requirements under sub-paragraph (1) does not stop a notice under paragraph 3(1) requiring the delivery of any additional information, accounts, statements and reports as part of a company tax return." (FA 1998, Sch 18, para 3A)

​

Each return must include a self-assessment

​

"(1)     Every company tax return for an accounting period must include an assessment (a “self-assessment”) of the amount of tax which is payable by the company for that period—

(a)     on the basis of the information contained in the return, and

(b)     taking into account any relief or allowance for which a claim is included in the return or which is required to be given in relation to that accounting period." (FA 1998, Sch 18, para 7(1))

​

Periods treated as accounting periods deemed to be accounting periods

​

"(2)     For this purpose a company tax return is regarded as a return for an accounting period if the period is treated in the return as an accounting period and is not longer than twelve months, even though it is not, or may not be, an accounting period." (FA 1998, Sch 18, para 7(2))

​

​

Composition of company tax return

Composition of corporate partner's company tax return

 

Must include amounts shown in partnership statement

​

"(1)     A company tax return of a company which carries on a trade, profession or business in partnership must include any amount which in a relevant partnership statement is stated to be its share of any income, loss, consideration, tax, credit or charge.

(2)     A “relevant partnership statement” means a statement under section 12AB of the Taxes Management Act 1970 for the period for which the return is made or a period which includes that period or any part of it." (FA 1998, Sch 18, para 12)

 

 

Document purporting to be a return will be a return unless omissions are serious

​

“Whether a return sent to the respondents pursuant to a notice served under section 8 of the 1970 Act, does or does not amount to a tax return within the meaning of that statutory provision must be a matter of fact and degree. It cannot be open to the respondents to reject a return simply because it contends that there may be some detail lacking from it, which might automatically give rise to penalties being incurred, unless the omissions are, as a matter of fact and degree, so serious as to allow it to be said that the return is not, in reality, a return in respect of the matters which the notice served under section 8 of the 1970 Act required to be returned.” (Pidgeon v. HMRC [2017] UKFTT 438 (TC), §17, Judge Geraint Jones QC).
 

 

Document purporting to be a return will be a return unless omissions are serious

White space entry is a matter for the taxpayer – no obligation

 

“As a result, the only course open to a taxpayer who considers that relief is available is to proceed on that basis and wait to see whether HMRC choose to question the stance which that taxpayer has taken. Mr Firth pointed out that the taxpayer would have to decide whether to make any disclosure in the “white space” on the tax return and potentially block any discovery assessment, or to say nothing and remain at risk of a discovery assessment. I agree with him that this is a matter for the taxpayer and his advisers.” (Munford v. HMRC [2017] UKFTT 19 (TC), §204, Judge John Clark).
 

 

White space entry is a matter for the taxpayer

Method of submission

 

Presumption that return not delivered if not recorded on HMRC’s computer

 

“(2) The use of an authorised method of electronic communications shall be presumed, unless the contrary is proved, not to have resulted in the making of a payment, or the delivery of information—
(a)  in the case of information falling to be delivered, or a payment falling to be made, to the Board, if the making of the payment or the delivery of the information has not been recorded on an official computer system;” (Income and Corporation Tax (Electronic Communications) Regulations 2003, SI2003/282, r.9(2))

 

“As there is no record on the HMRC computer system of the filing on 31 January 2014, then there is presumed to be no delivery of the return “unless the contrary is proved”.” (Hauser v. HMRC [2015] UKFTT 682 (TC), §20).

 

Query whether the duty is to prove that the return was recorded on the computer system

 

“We are not quite sure what the “contrary” is here: if it is to prove that the return was in fact delivered electronically in the sense that the relevant electric data did reach the HMRC system but were not recorded, it is difficult to see how anyone could do that.  Equally if the burden is on the appellant to prove that the delivery has in fact been recorded on the HMRC computer system despite HMRC’s denials, it is equally difficult to see how that can be proved by anyone without access to the system…In this case we also do not consider that the appellant has proved to the contrary, i.e. that the return was recorded on the HMRC computer system, and so we hold that she did fail to deliver her return before the penalty date.” (Hauser v. HMRC [2015] UKFTT 682 (TC), §§20…22, although FTT held that a belief the return had been submitted provide a reasonable excuse)

 

Paper return proved to be posted treated as received

 

“The relevant law here is the Interpretation Act 1978, s 7, which reads: “Where an Act authorises or requires any document to be served by post (whether the expression ‘serve’ or the expression ‘give’ or ‘send’ or any other expression is used) then, unless the contrary intention appears, the service is deemed to be effected by properly addressing, pre-paying and posting a letter containing the document and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post”…Mrs Manuell has given evidence, which I have accepted, about the stamps she put on the letter being sufficient for next day delivery by first class post, and has also given evidence, supported by the Schedule, of the posting date…Although HMRC’s Statement of Case says that the return was not received until 10 November 2015, that is a  mere assertion: no evidence has been produced.  For example, there is nothing setting out HMRC’s procedures for logging post, no copy of the envelope which contained the return, no evidence that Royal Mail had charged supplementary postage.” (Akhtar v. HMRC [2017] UKFTT 651 (TC), §§17…18…22, Judge Redston).
 

 

Method of submission

Person submitting must have been authorised

 

No delegation to sub-agent

​

"[39] The law of agency on the ability of an agent to delegate or appoint a sub-agent is set out in Bowstead & Reynolds on Agency 22nd Edition (published by Sweet & Maxwell) at 5-001. Where the act done involves confidence, such as the appointment to file a tax return, an agent may not delegate or appoint a sub-agent without the express or implied authority of the principal. The cases where authority is implied are confined to five identifiable cases none of which is relevant here. A delegation by an agent or appointment of a sub-agent may be ratified by the principal.

[40] We find as a fact that Mr McCumiskey appointed Alpha (and not Mr Brown) as his agent. This fact was accepted by Officer Kinnear as referred to in his Witness Statement at paras [7],[10] and [23]. We also find as a fact that Mr McCumiskey gave his information to Mr Brown as director of Alpha.

[41] In consequence, unless there was an express authority given by Mr McCumiskey to Alpha to appoint Capital as a sub-agent or there has been a ratification by Mr McCuniskey of the appointment of Capital, Capital may not be regarded as the agent of Mr McCumiskey.

[42] We find as a fact that Mr McCumiskey never saw the form 64-8 and so did not expressly approve the appointment of Capital, and that HMRC has not retained the form 64-8 and so cannot discharge the burden of proving that Mr McCumiskey appointed Capital as his agent. Indeed, all the evidence assembled by Mr Kinnear in his Witness Statement points to Alpha having been appointed by Mr McCumiskey and Mr McCumiskey having had no knowledge of Capital." (McCumiskey v. HMRC [2022] UKFTT 128 (TC), Judge Gething)

​

"[66] Mr Huntly’s case is he appointed Mr Brown to file a return claiming relief for expenses and repayment of tax for periods of unemployment. A return containing a fraudulent claim for EIS relief was made by CAC. It is not clear to me whether Mr Brown was employed by or a director of CAC at the time and that raises the issue of whether CAC was a duly authorised agent. If not duly authorised, the return filed by CAC was not Mr Huntly’s return. In cases concerning confidential matters such as the filing of a tax return, an agent may not appoint a sub-agent without the principal’s express consent of express ratification. This is a very important principle of law." (Huntly v. HMRC [2022] UKFTT 135 (TC), Judge Gething)

​

Person submitting must have been authorised

Not a return (or claim for relief) if not authorised

​

"[45] Accordingly, we find that there was no valid appointment of Capital as agent or subagent of Mr McCumiskey and that Capital was not “acting on behalf of” Mr McCumiskey.

[46] The purported return was not therefore a self-assessment return filed by or on behalf of Mr McCumiskey. The claim for SEIS relief was not made by or on behalf of Mr McCumiskey. No SEIS relief was therefore given to him." (McCumiskey v. HMRC [2022] UKFTT 128 (TC), Judge Gething)

​

Not a return (or claim for relief) if not authorised

Time limits (to avoid penalty)

​

Personal and trustee tax returns

 

​

​

​

​

​

​

​

​

​

 

NB: “year 2” refers to the tax year after the tax year to which the return relates.

​

Partnership tax return (partnership with no corporate partners)

 

As specified in the notice, but not earlier than the dates specified for  personal tax returns (TMA 1970, ss.12AA(4) – (4E)).

 

Corporation tax return (normally 12 months)

​

"(4)     The return must be delivered to the officer of the Board by whom the notice was issued not later than the filing date." (FA 1998, Sch 18, para 3(4))

​

"(1)     The filing date for a company tax return is the last day of whichever of the following periods is the last to end—

(a)     twelve months from the end of the period for which the return is made;

(b)     if the company's relevant period of account is not longer than 18 months, twelve months from the end of that period;

(c)     if the company's relevant period of account is longer than 18 months, 30 months from the beginning of that period;

(d)     three months from the date on which the notice requiring the return was served.

 

(2)     In sub-paragraph (1) “relevant period of account” means, in relation to a return for an accounting period, the period of account of the company in which the last day of that accounting period falls." (FA 1998, Sch 18, para 14)

 

Partnership tax return (partnership with corporate partners)

​

As specified in the notice, but not earlier than the dates specified for corporation tax returns (TMA 1970, ss.12AA(5) – (5D)).
 

​

Time limits (to avoid penalty)

No late filing penalty if HMRC reject the return for computational error

 

“If a return has been received by that specified date, HMRC cannot charge a late filing penalty if they subsequently “unlog” the return and return it to the taxpayer on the basis that they believe it contains a computational error.” (Akhtar v. HMRC [2017] UKFTT 651 (TC), §25, Judge Redston – also noted HMRC’s power to correct obvious errors).
 

No late filing penalty if HMRC reject the return for computational error

Time limit for self-assessment to be processed: 4 years

 

"(1)     Subject to subsections (2) and (3), a self assessment contained in a return under section 8 or 8A may be made and delivered at any time not more than 4 years after the end of the year of assessment to which it relates.

 

(2)     Nothing in subsection (1) prevents—

(a)     a person who has received a notice under section 8 or 8A within that period of 4 years from delivering a return including a self-assessment within the period of 3 months beginning with the date of the notice,

(b)     a person in respect of whom a determination under section 28C has been made from making a self-assessment in accordance with that section within the period allowed by subsection (5)(a) or (b) of that section.

 

(3)     Subsection (1) has effect subject to the following provisions of this Act and to any other provisions of the Taxes Acts allowing a longer period in any particular class of case." (TMA 1970, s.34A(1) - (3))

 

Transitional rule

​

(4)     This section has effect in relation to self-assessments for a year of assessment earlier than 2012-13 as if—

(a)     in subsection (1) for the words from “not more” to the end there were substituted “on or before 5 April 2017”, and

(b)     in subsection (2)(a) for the words “within that period of 4 years” there were substituted “on or before 5 April 2017." (TMA 1970, s.34A(4))

​

Reason for rule

​

See the decision in R (oao Higgs) v. HMRC [2015] UKUT 92 (TCC)

​

Time limit for self-assessment to be processed: 4 years

How HMRC process returns

​

“The FTT point out that although the legislation appears to assume that a tax return, once submitted, will be examined by an officer of HMRC, practice is rather different. Unless the taxpayer leaves the calculation of tax to HMRC, the return will not normally be examined by an individual officer. The data from each return is inserted into a database by HMRC officers, a purely clerical exercise involving no consideration of the contents of a return. The initial examination of a taxpayer’s return is carried out by a computer, which is programmed to carry out an initial risk assessment based on various algorithms and filters. Sometimes this is the only examination of a return.” (Pattullo v. HMRC [2016] UKUT 270 (TCC), §29, Lord Glennie)
 

How HMRC process returns
bottom of page