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Taxpayer wins appeal for overpaid tax repayment

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20th Apr 2015
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A solicitor who overpaid £27,000 in tax but forgot to sign and date his self-assessment tax return has won an appeal for HMRC to refund the overpaid tax.

This was successful even though it was outside the four-year deadline for reclaiming overpaid tax.

In Andrew Michael Higgs v HMRC, UKUT 0092Higgs overpaid the tax in his 2006/2007 self-assessment tax return, which was prepared by his accountants, Know Cropper, in March 2008.

Higgs ticked the box in the tax form to claim a refund on over-paid tax but didn't sign or date the form or return it to his accountants. He was unable to explain why he didn't sign and date the form, although around this time there were "family pressures" relating to the death of his mother-in-law in Ireland in January 2008, the tribunal heard.

In November 2009, HMRC sent the Claimant and Knox Cropper a statement of his payments on account, including those in respect of the year 2006/2007, and a letter requesting a completed tax return for that year “as soon as possible.”

HMRC sent statements of payments on account to Higgs, all of which included the payments on account for 2006/2007. Higgs said that none of the letters expressly referred to the outstanding tax return for 2006/2007, and that the letter in November 2009 was the first and only reminder he received for it.

Section 34(1) Taxes Management Act 1970 ("TMA") stipulates a limit of four years for assessment of tax.

The Revenue said it wasn't going to process Higgs's tax return for 2007/2006 because it was out of time. It also said it was entitled to keep the overpaid tax on account. Higgs then sought a judicial review of HMRC's decision.

He argued that section 34(1) applied only to assessments made by HMRC and therefore did not apply to a self-assessment such as the one in his return for 2006/07. If section 34 did apply to a self-assessment, HMRC has a discretion to extend the deadline which it was obliged to exercise in his favour, Higgs also argued.

If HMRC did not extend the time limit for assessment of tax as, in the absence of an extension, Higgs said that he would would "suffer disproportionate damage resulting in an infringement of his rights under Article 1 of Protocol 1 to the European Convention on Human Rights."

The upper tribunal sided with the taxpayer. It said that in the event of a successful appeal by HMRC on the construction of section 34, the Revenue should consider whether "it would be appropriate to exercise their discretion to extend the time limit so as to permit the claimant’s self-assessment and repayment claim to be processed."

Nicholas Fernyhough, a senior associate in the tax dispute resolution team at law firm RPC, said HMRC's argument for re-paying over-paid tax relied on on an interpretation of section 34 TMA "which had been doubted for some considerable time."

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By johnjenkins
20th Apr 2015 11:46

There really shouldn't

be any argument. If HMRC have "discovery" surely the tax payer should have the right to claim overpaid tax. It would appear that HMRC's argument is based on that fact that they didn't need to process the tax return because it was out of time, so there was no overpayment. This is a fantastic and common sense result.

I don't see why there should be any time limits on SA tax returns especially in the light of HMRC wanting tax payers to pay the "right" amount of tax.

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By sbt
21st Apr 2015 11:28

Shame his accountant didn't notice the return was never submitted

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