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Can HRMC claim unpaid SDLT amounts after 12months?

An individual made an innocent mistake when filing SDLT and after 13 months HRMC sent him a letter

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Trying to figure out if HRMC can legally claim SDLT of a transaction beyond 12 months of filing it. I understood that SDLT was barred after 12 months. Maybe if HRMC suspects about an individual's tax filings can come back to SDLT even after the 12 months period? Thanks 

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By Hugo Fair
28th Sep 2021 22:51

On what possible basis did you think that collection of a tax amount that is due becomes time-barred after 12 months (especially where lack of collection of the full amount is attributable to a mistake, innocent or otherwise, made by the taxpayer when filing)?

And for what it's worth, if HRMC suspects deliberate false figures within an individual's tax filing ... they can go back a lot longer than 12 months (potentially indefinitely)!

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Replying to Hugo Fair:
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By Pgc19
29th Sep 2021 00:13

Thanks a lot for the response :-) I based the assumption on this link, https://www.gov.uk/guidance/sdlt-hmrc-compliance-checks in particular the following extract: Time limits. HMRC normally has 9 months from the filing date to tell you that they’re starting a check. They’ve got longer if you’ve changed your tax return…

I also read the following extract from here https://www.patrickcannon.net/news/time-limit-for-hmrc-investigations/ : What is the time limit for HMRC to open an enquiry?
HMRC can open a full enquiry into a tax return if they give notice to the taxpayer and do so within the time limit. The time limit allowed is basically 12 months from when the return was filed

This is where my confusion is coming, apologies for my lack of knowledge

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Replying to Pgc19:
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By Hugo Fair
29th Sep 2021 00:47

Leaving aside the oft re-iterated point made on this site that GOV.UK is at best only broad guidance, it's always a good idea to read the whole page ... and not just extract the bit that you like the sound of.
The bit you quote is the start of info regarding starting a check (not a formal enquiry) - but you haven't said what kind of letter your client received from HMRC, or indeed whether it's the first communication they've sent.

In https://www.gov.uk/hmrc-internal-manuals/compliance-handbook/ch53100
you will see that "In certain circumstances the time limits for assessing are extended beyond the normal time limit of 4 years from the end of the relevant tax period."
For instance, for SDLT, the time-limit can be extended to 6 years if the person’s behaviour (or that of a person acting on their behalf) was careless when leading to the loss of tax.

Basically there are a lot of rules relating to time-limits (depending on the tax, the taxpayer's behaviour, and whether the issue relates to a 'scheme'), so it's not possible to provide a categoric answer here for your client's circumstances.
But if you think about it, it should be obvious that a taxpayer cannot merely make a mistake in their return and then keep their fingers crossed for a year in the hope of 'getting away with it' ... otherwise everyone would be doing just that!

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Replying to Hugo Fair:
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By Justin Bryant
29th Sep 2021 10:40

Hugo, you are being unfair (and are wrong - I refrain from using the G or D words, lest I set another SDLT hare running). It is perfectly possible for HMRC to be barred (there must necessarily be a mistake of some kind for the point to be in issue in the 1st place), although in practice it's unlikely.

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Replying to Justin Bryant:
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By Hugo Fair
29th Sep 2021 12:00

No problem, Justin ... I'm not a professional article-writer (or particularly sensitive), but will claim a slightly similar 'defence' in that I was trying to explain in a briefish way why the OP's starting-point was an unlikely assumption (given that it states client had made 'errors' in the submission).
Feel free to point out the errors of my ways (here or elsewhere) - especially if you want to expand on the specifics (I'm always willing to learn).

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Replying to Hugo Fair:
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By Justin Bryant
29th Sep 2021 12:17

For starters, the so-called Veltema defence could apply or HMRC could be barred by simply cocking up their assessment (which happens more often than you might expect).

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Replying to Justin Bryant:
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By Tax Dragon
29th Sep 2021 12:33

I presume you are answering Hugo's question generically - not necessarily in the SDLT-specific context provided by the OP.

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Replying to Tax Dragon:
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By Justin Bryant
29th Sep 2021 13:06

Yes.

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Replying to Justin Bryant:
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By More unearned luck
29th Sep 2021 19:52

In that case, I'll quibble Hugo's assertion that a check is something different to a formal enquiry. If Hugo was correct it would give HMRC three bites of the cherry (informal check, formal enquiry and DA) which seems very greedy of them.

But the linked Gov.uk page says that the check is concluded with a closure notice, so a check is a formal enquiry.

What is interesting is HMRC's assertion that an SDLT enquiry can be commenced with a phone call. That definitely isn't the case for direct taxes.

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Replying to Justin Bryant:
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By Hugo Fair
29th Sep 2021 20:03

So, back to OP ... that's one reason I previously said to OP that "you haven't said what kind of letter your client received from HMRC, or indeed whether it's the first communication they've sent."
Likewise the OP stated taxpayer "made an innocent mistake when filing SDLT" - but doesn't explain the basis of this discovery, or by whom it was made or when.
I know it's foolish to speculate based on unknowns, but I was trying to encourage some research & thinking.

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Jason Croke
By Jason Croke
28th Sep 2021 23:30

Was this calculated/submitted by the lawyers? Else are you saying an individual calculated and filed their own SDLT1?

The 12 month deadline I think you refer to is for amending returns already submitted.

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Replying to Jason Croke:
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By The Dullard
29th Sep 2021 13:51

There is also a 12 month enquiry window, and after that, as Justin observes, HMRC must have a discovery; for which there needs to be information that they couldn't reasonably be expected to have had before the end of the enquiry window.

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Replying to The Dullard:
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By Pgc19
02nd Oct 2021 09:01

Thanks to everyone for the exciting debate. Apologies I couldn’t reply earlier due to technical difficulties. I have now collected more information of the case. HRMC has sent an inquiry of more information related to foreign income clarifications. The customer became domiciled last fiscal hence couldn’t claim remittance basis anymore. Foreign income is small around £10k, but I guess HRMC wants clarity on it. This inquiry came 14 months after the property SDLT filing transaction. Question customers raises about SDLT is that when collecting information for responding to HRMC he found an error in the SDLT that caused underpayment to HRMC. Can HRMC claim that underpayment now more than 12 months from filing SDLT return? Should customer flag it to HRMC asap before responding to the inquiry? Thanks!

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By Justin Bryant
30th Sep 2021 09:25

HMRC are only limited to "two bites" in terms of formal assessments (i.e. CNs, determinations or DAs). That is clear from CoA Tooth (this point was not overruled or otherwise challenged in the SC and is supported by subsequent case law) e.g. if HMRC make an invalid CN they cannot cure that defective CN with a DA. There is only one person here who thinks that's totally wrong as far as I'm aware (RayM55). See:
https://www.accountingweb.co.uk/tax/hmrc-policy/hmrc-loses-tooth-but-sta...

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Replying to Justin Bryant:
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By More unearned luck
30th Sep 2021 16:32

Depends on what you mean by 'invalid CN'.
If it is truly invalid doesn't that simply mean that the enquiry hasn't been closed and HMRC are free to (re)issue the CN free from the fatal defect - no DA required?
If it's a case of HMRC regretting their conclusion (eg the CN says the SA is increased to £100K, but they afterwards realise that they meant £200K) then Ray might have a point. It depends on how final and conclusive Parliament intended a CN to be (cf a s 54 agreement). As the safeguards in ss 29 & 36 won't protect, say, the restaurateur who suppresses his takings, it would seem that if CNs aren't final HMRC can return for second and third etc helpings.

Remind me: of the relevance of Tooth? HMRC's error in that case was opening the wrong sort of enquiry and has nothing to do with CNs valid or otherwise.

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Replying to More unearned luck:
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By Justin Bryant
30th Sep 2021 16:51

If you read the debate between me and RayM55 in the above link you should hopefully understand my point, which is confirmed by other tax lawyers you will see there.

I of course meant HMRC aren't allowed two bites of the formal assessment cherry if their second bite is a DA per CoA Tooth (which is not the same point the SC made re a different HMRC officer being able to make the same discovery, as a discovery per se without more is not an assessment and that may have confused RayM55 & others and of course HMRC can make the same discovery twice per SC Tooth, but it does not follow from that that they can use a DA to correct an invalid CN as explained above).

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By Tax Dragon
30th Sep 2021 09:49

I don't think cherries come into this discussion. (Justin's points in the linked-to debate are worthy of attention, but of no obvious relevance to the OP.)

But there's no helping the OP without more info, IMHO. Beyond stating what s/he should already know, if s/he's advising on these matters: that an enquiry under Pt3 of Sch10 has a nine-month, not a 12-month window; while an assessment under Pt5 to correct an innocent error has a four year window.

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By Pgc19
02nd Oct 2021 09:03

Thanks to everyone for the exciting debate. Apologies I couldn’t reply earlier due to technical difficulties. I have now collected more information of the case. HRMC has sent an inquiry of more information related to foreign income clarifications. The customer became domiciled last fiscal hence couldn’t claim remittance basis anymore. Foreign income is small around £10k, but I guess HRMC wants clarity on it. This inquiry came 14 months after the property SDLT filing transaction. Question customers raises about SDLT is that when collecting information for responding to HRMC he found an error in the SDLT that caused underpayment to HRMC. Can HRMC claim that underpayment now more than 12 months from filing SDLT return? Should customer flag it to HRMC asap before responding to the inquiry? Thanks

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