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Tribunal rejects HMRC out of time position

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19th Jun 2015
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HMRC is blocking valid tax repayments by imposing a four-year rule which the Upper Tribunal says does not apply.

Unlike HMRC (a corporate body) individual taxpayers are human. They suffer illnesses; mental and physical, and life-disrupting events which can cause them to miss tax return filing deadlines, sometimes by some years.

Most tax claim and assessment deadlines were revised down from six years to four years from the end of the relevant tax year, with effect from 6 April 2010. This change in the law may have caught out a large number of taxpayers, and perhaps their advisers, who were brought up on the old six year rule. 

Where a tax return has not been filed as expected, and HMRC believes tax is due, it will issue a ‘determination’ of an estimated amount of tax, which can only be removed by the taxpayer submitting a self assessment return. Penalties and interest will also be charged on the estimated tax liability. A sad example of the mess a taxpayer can land in was recently set out on the ICAEW Tax Forum.

In that case the taxpayer overpaid tax as he continued to make payments on account in the years in which he was too ill to complete a tax return. Once he got his life in order he submitted the outstanding tax returns, but HMRC refused to process the returns for the earlier years as they fall outside of the four year assessment period.    

This is wrong, as it was decided in R (oao Higgs) v HMRC [2015] UKUT 92(TCC), that the taxpayer should receive the repayment of overpaid tax in such situations. However, in spite of the Upper Tribunal ruling that the four-year assessment deadline only applies to HMRC’s assessments, and not to self assessments made by the taxpayer, HMRC is still refusing to process tax returns which are outside of four year limit.

Well known tax barrister Keith Gordon is encouraging tax advisers to resubmit clients’ tax returns  which have been rejected by HMRC because of the four-year (and previous six-year) rule, as the Higgs case proves that the claims for repayment of overpaid tax should be accepted by HMRC. Keith is also warning that the law (TMA 1970 s, 34) may be changed with immediate effect at the Budget on 8 July 2015, so don’t delay - get those old claims in now!

Rebecca Cave is the author of Bloomsbury’s Tax Rates and Tables 2015/16 (Pre-Election edition).

Replies (8)

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By morgani
22nd Jun 2015 06:29

Still not gettign progress

We have a case which to cut the long story very short.

For health (no doctors proof) and lack of money the client continued to pay the tax demands of HMRC and did not file any returns.  Determinations were raised based on the old tax which in reality are far in excess of the tax owed resulting in nearly a £20k refund due.

We have attempted to get it accepted and have even quoted the above mentioned case which HMRC have rejected.  It is becoming a huge battle.  not giving up hope and determined to get a reuslt as it has put the clinet in financial hardship and out of business.

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By djmoss
22nd Jun 2015 11:08

I thought HMRC had to enforce the law not decide it

If a judge has made a ruling, surely HMRC are bound by it - they cannot pick and choose which case law they accept and which they would prefer to ignore.

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By C T Edwards
22nd Jun 2015 11:14

OUT OF TIMNE CLAIMS

I've just picked up a self assessment higher rate client whose previous accountant does not appear to have claimed the married couples allowances to which he was entitled -even though HMRC showed the allowance on his coding notices.

I've submitted a claim for the past 4 years, but, in view of Higgs, does this mean I can claim for even earlier years?

If so, how far back?

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By malcolmtune
22nd Jun 2015 17:05

Higgs Decision

Does the court ruling on tax returns over four years extend to P87 claims.  A few years ago I submitted six years PO87 claims for a client, but the first two years were rejected.

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By Ted Numbers
23rd Jun 2015 15:30

Higgs

Until it is clear that HMRC won't be appealing the decision, HMRC will not accept that it is a precedent. Of course HMRC are happy to cite FTT decisions (let alone UTT) as precedents in brow beating taxpayers - especially wrong ones!

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By AndrewV12
24th Jun 2015 07:31

Thank goodness R Higgs good victory

R (oao Higgs) 

Well done R (ogao Higgs) for winning the case it makes all of our lives easier.

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By refs8
09th Jul 2015 15:55

Has this been changed in the budget?

Has this been changed in the budget does anyone know?

We have a case where we wish to make a claim for around £900 for 05.04.2011 tax year. I would an update / thoughts?

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By Michaelr205
11th May 2016 15:53

To give further information on this case, we are the accountants handling the case mentioned in the article re late returns due to ill health.
After approx 5 months, HMRC rejected the claim on the basis that Determinations had been issued for the years where returns were late. This meant that our case differed from the Higgs case as, for some reason, Determinations mustn't have been issued in that case.
HMRC won't need to change the law to protect them in the Higgs scenario (from what I can see) they just need to make sure they don't forget to issue Determinations. From the little bit of research I have managed to do so far it seems that the issuing of a Determination starts the four year clock.
Does anyone know anything different?

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