TMA S9ZB(4)

Will HMRC ever learn?

Didn't find your answer?

File a Return with Class 2 NI charged (voluntary or not). HMRC amend.

TMA S9ZB(4) nulifies that amendment, but should we really have to jump through so many hoops to get HMRC to comply with the legislation?

I ask Richard Thomas in particular - do HMRC have any defence against their failure on this at all? The legislation seem pretty clear cut to me.

Replies (23)

Please login or register to join the discussion.

avatar
By rmillaree
24th Nov 2021 15:39

Is the class2ni switch correctly set on hmrc class2NI computers ? for the issues you are raising?

If not you are fighting a losing battle as hmrc need to be expecting the class2ni to allow them to process the return practicably speaking. If the switch is wrong unfortunately we as the accountants need to contact class2 ni to amend. You are fighting a losing battle trying to amend returns if the tap is in the wrong position in this regard whatever the legislation says. This really is an area we as agents need to understand this fact and ensure the marker is correct.

If there is no mismatch have you checked that the client might have already qualified via other means - eg say they were on employment support allowance they may already have qualified.

After settling the above 2 issues i have never really had an issue ensuring the class2NI is as it should be - most of the time an hmrc amendment flags up the tap is in the wrong position or client might be eligible not to pay.

In summary i have not really sen an issue here - in some respects the random amendments ensure any inaccuries on the class2NI record are addressed. I do not want to go back to the old system of sweeping these under the table.

I am ignoring the murky world of people who may have maxed out on ni due to high employment and sole trader profits combined.

Thanks (0)
avatar
By Paul Crowley
24th Nov 2021 15:53

The issue is that the HMRC system is now and was broken
Cancelling the DD (when it should have been cancelled) was taken by HMRC to be a statement of trade cessation
But only for some, indeed not that many

Thanks (0)
Replying to Paul Crowley:
By SteveHa
24th Nov 2021 16:03

The issue is that S9ZB(4) says "A correction under this section is of no effect if the person whose return it is gives notice rejecting the correction."

9ZB(4) is unconditional, but HMRC insist on attaching conditions when it comes to Class 2.

Thanks (0)
Replying to SteveHa:
avatar
By rmillaree
24th Nov 2021 18:00

Being frank i thinks its ultimately sensible course of action if the class2NI marker is known to be wrong to insist on that being corrected before processing the correction to the return.

They are not refusing to process the correction outright they are just confirming that the two records need to be in synch first before teh correction can be done.

I don't disagree with your principle that this might be slightly at odds with the legislation as it is worded but who cares if that gives us the best solution - knowing the class2NI marker is wrong and ignoring that fact is about as bad a situation as you can be in IMHO so i can see why they are doing exactly what they do and i agree with their stance in this regard.

Thanks (0)
avatar
By gillybean04
24th Nov 2021 18:04

It's in their own manuals.

"Where a taxpayer disagrees with a correction made by an officer of the Board he or she is entitled to reject the correction by notice within 30 days of receiving the correction. In such cases HMRC could only pursue the matter by means of a formal enquiry."

https://www.gov.uk/hmrc-internal-manuals/self-assessment-legal-framework...

I would caution that 9zb was introduced before class 2 began to be collected via self assessment. Therefore it likely wasn't drafted with class 2 in mind and there may be other relevant legislation regarding class 2 specifically.

Thanks (0)
avatar
By More unearned luck
24th Nov 2021 18:12

Assuming that the class 2NIC rules mirror those for income tax and CGT in the TMA (I've not looked them up but it seems to be a reasonable assumption) then HMRC can within 9 months of the tax return being filed correct any obvious errors or omissions and "anything else in the return that the officer* has reason to believe is incorrect in the light of information available to the officer*".

I think that it is indisputable that where there is a mismatch between HMRC's NIC system and the tax return HMRC automatically changes the return to agree to the NIC system without carrying out any investigation. I think that lack of enquiry is unreasonable especially as it may result in the taxpayer getting a smaller state pension than otherwise and also in the cases where HMRC don't also delete the class 4 (which they never do)- how can a taxpayer be liable to pay class 4 and not class 2?. We should all complain vociferously whenever this happens.

The real solution, especially as it would cut red tape, is to scrap the requirement to register and de-register to pay class 2 for people in SA. Instead HMRC glean commencement and caseation data from the tax returns. Currently taxpayers need to provide dates of starting and ending twice to HMRC.

As already said, there is a right to reject the so-called amendment/correction.

*Following FA 2020 read "Her Majesty's Revenue and Customs". The CRCA 2005 says "The Commissioners and the officers of Revenue and Customs may together be referred to as Her Majesty’s Revenue and Customs" so it now seems that everyone working for HMRC must collectively make the decision to 'amend' .

Thanks (0)
Replying to More unearned luck:
avatar
By rmillaree
24th Nov 2021 18:59

"I think that it is indisputable that where there is a mismatch between HMRC's NIC system and the tax return HMRC automatically changes the return to agree to the NIC system without carrying out any investigation. I think that lack of enquiry is unreasonable especially as it may result in the taxpayer getting a smaller state pension than otherwise and also in the cases where HMRC don't also delete the class 4 (which they never do)- how can a taxpayer be liable to pay class 4 and not class 2?. We should all complain vociferously whenever this happens."

The problem is how on earth are hmrc meant to know what the correct solution to the problem is - practicably speaking by flagging up anomolies and ensuring this is corrected before proceeding if the class2NI system is wrong makes complete sense to me. As it ensures the two systems are in alignment.

I would agree the way they are going about things is p poor - they should automatically generate a letter detailing the anomily clearly communicate this fact and provide what information they hold and demand reponse and in the meantime advise if you want to amend return (as is your right) you can do.

However with their systems as they are i think us as agents checking and confirming details and updating/correcting if needs be is the best course of action if the IT won;t work as they would like in cloud cookoo land (having sensible systems being cloud cookoo land for hmrc)

seems i may be well in the minority with my line of thinking here though - so i should probably get back under my bushel.

Thanks (0)
Replying to rmillaree:
avatar
By More unearned luck
24th Nov 2021 22:25

How can it be 'complete sense' to have a practice that aligns the two systems so that both are wrong, especially if that wrong alignment leads to a loss of state pension for the taxpayer and the initial mismatch is HMRC's error.

Why should it be the taxpayer's responsibility (or that of 'us agents') to correct HMRC's error, especially when it is so difficult to make contact with a sentient human being in the tax office who knows how to fix their error and is willing to do so?

In these cases the taxpayer has made a correct self-assessment. That should be the end of his or her responsibility. HMRC should not impose on him or her the burden of objecting to HMRC's so-called correction.

The return will include: SE or partnership pages, the taxpayer's date of birth, sufficient income to make Class 2 compulsory or the voluntary box ticked. All the information need to decide the taxpayer must or choses to pay class 2 is there in front of HMRC's eyes. The assumption that the return is wrong is completely unfounded. Even in cases where the taxpayer hasn't registered it is still clear that is the source of the error and is not the way the return has been completed. The letter you suggest is the correct response to any discrepancy.

Thanks (0)
Replying to More unearned luck:
avatar
By rmillaree
24th Nov 2021 23:28

It’s not about two wrongs it’s about getting two rights.
It’s pretty simple that us agents need to ensure the class2 in marker is correct and you then won’t generally get these glitches on the sa returns. So it’s all about ensuring that marker is correct and all is ok. Getting annoyed that hmrc won’t play ball ref tax returns if you know or suspect the marker is wrong is imho a futile waste of time while the computers work as they do.

As to whose error it is in the first place ref marker I suspect the majority of the errors are due to individuals and accountants not doing correct notifications in the first place - there is even a happy camper or two who come on here and tell others to complete sa1 notifications when bods are starting up as sole traders.

Thanks (0)
Replying to More unearned luck:
avatar
By Matrix
24th Nov 2021 20:16

I also fail to understand how they can remove Class 2 from a return where Class 4 is payable. A flag could be created to prevent this.

I got one of these corrections today. The client was also employed last year so I thought it was the interaction of Class 1/2/4 but it was the removal of Class 2.

Client is now solely self employed, so will need to sort it out. However the correction has actually saved her money.

Thanks (0)
Replying to Matrix:
By ireallyshouldknowthisbut
25th Nov 2021 09:15

@Matrix, the 'correction' wont help your client if they need qualifying years for state pension. No Class 2 marker, not self employed according HMRC, no qualifying year.

There must be 100,000's of tax payers paying class 4 but not registered for NI some of whom will be losing pension rights.

its a big timebomb ticking away. Be interesting from a PI perspective.

Thanks (1)
Replying to ireallyshouldknowthisbut:
avatar
By Matrix
25th Nov 2021 10:40

She was also employed.

Thanks (0)
Replying to Matrix:
avatar
By rmillaree
25th Nov 2021 09:54

Matrix
"I also fail to understand how they can remove Class 2 from a return where Class 4 is payable. A flag could be created to prevent this."

I stand to be corrected but i am pretty sure it does not always follow that class2 MUST be present simply due to the fact that class4 is present - feel free to correct me in this assumption if i am wrong. If this is correct then not having automatic block at least has justification- infact if someone has qualified for stamp elsewhere it makes sense to not automatically include class2NI that did not need to be paid !

Here is link to manual where class2Ni "exception" examples are listed i would not presume for all these circustmances listed that there would be no class4NI due.

https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual/nim20775

Thanks (0)
Replying to rmillaree:
avatar
By gillybean04
25th Nov 2021 13:11

According to SSCBA 1992, Class 2 liability arises on a self employed earner. While class 4 liability arises on profits arising from a vocation, trade or profession (those chargeable under chapter 2 of part 2 ITTOIA).

I imagine at one time, there was a clear line in the sand. But with the numerous changes to legislation since, that clear line is now more of a fuzzy squiggle.

Thanks (0)
avatar
By Wanderer
25th Nov 2021 09:39

Been discussed on AWeb loads of time.

We discussed the detail of the law here:-
https://www.accountingweb.co.uk/any-answers/hmrc-satr-amendment

Richard laid out the law, I tried to give the practical aspects. (Steve you should know all this as you started that thread.)

My advice:-
Give up fighting the system & just jump through HMRC's hoops.

Thanks (1)
Replying to Wanderer:
By SteveHa
25th Nov 2021 09:59

So I should. I can barely remember what I had for breakfast these days, let alone what I did almost a year ago.

Thanks (0)
avatar
By richard thomas
26th Nov 2021 17:36

I'd like to be able to answer the question, but I do not think I understand it. What precisely is the failure by HMRC? Or has the thread answered the question?

In legal terms I do not think I can add anything to what I said in your previous post on this that is linked to by Wanderer, save to say that looking at the rules for deciding whether sufficient contributions have been made towards the state pension, the only requirement is that Class 2 contributions have been "actually paid" (para 5 Sch 3 SSCBA 1992). The requirement to pay is in s 59B TMA as applied to Class 2 by s 11A(1)(a) SSCBA. Section 59B, like s 9 TMA, is silent about who the tax should be paid to, but as all NI Contributions are payable to the Inland Revenue (s 1 SSCBA) and "Inland Revenue" in that Act means the "Commissioners for Her Majesty's Revenue and Customs" (s 122(1) SSCBA as modified by s 50(1) CRCA 2005). It doesn't require the payment to have been allocated anywhere internally, nor that the contributions have been paid into the National Insurance Fund, so if there are any doubts about whether people are properly credited with contributions it would be a good idea to get evidence of payment of Class 2 to HMRC as part of the SA balancing payment.

Thanks (0)
Replying to richard thomas:
By SteveHa
26th Nov 2021 19:04

@richard thomas, Firstly I apologise for letting my ageing memory of having raised this slip, and I'm grateful to Wanderer for reminding me.

And you were most comprehensive in your previous replies, though I stand by my issue, in that if HMRC amend a Return, and the taxpayer objects to that amendment, S9ZB is unconditional in that HMRC must revert it.

I appreciate that they can then open an enquiry to rectify an error, but options available to them is not my issue. My issue is that they try to attach conditions to what is a very clear and simple piece of legislation that has no conditions attached to it at all.

Thanks (0)
Replying to SteveHa:
avatar
By More unearned luck
26th Nov 2021 20:38

Section 9ZB permits an officer* to 'correct' and to 'amend'. Clearly sometimes, as in this case, the officer (if he or she exists) is mistaken and changes a correct SA into a wrong SA. But I think that is OK if the officer is acting honestly and reasonably (to borrow from the UT in Charlton). But to delete the class 2 in a case where it is plain from the data in the return that the taxpayer is liable to pay the NIC or has volunteered to pay it is not reasonable and is, arguably, not honest. The conduct is even more outrageous if the mismatch between the SA and the NIC computer is due to HMRC's maladministration of the latter. HMRC should at least carry out an investigation before changing the SA. To comment on Richard's post, I would think that the DWP pays the state pension based the NIC System records and not on the SA records (not that it matters if HMRC refuse to restore the class 2).

There is no right of appeal. I assume that s 9ZB(4)is meant to be a complete answer, but clearly it isn't especially in those cases where HMRC look at the objection after 31 Jan.

The thing to do is to complain. Take the matter to the adjudicator and the ombudsman.

*But - see the UT decision in Allam at 31 et seq released this week. (The heading wrongly refers to s 103 FA 2019, it should read 2020.) Justin's interesting TIS case post has a link to BAILII) as to whether than officer need exist. The complained of change to the self-assessment is made without human intervention. Subsection 4 requires the objection to be made to the officer who made the change. How do you do that if no officer made the change?

Thanks (0)
Replying to More unearned luck:
avatar
By Not Anonymous
26th Nov 2021 20:57

This would seem to confirm an officer isn't making the changes, it's an automated process.

https://www.gov.uk/hmrc-internal-manuals/self-assessment-manual/sam121665

Thanks (0)
Replying to SteveHa:
avatar
By rmillaree
27th Nov 2021 10:47

Being Blunt SteveH

What is your issue with simply contacting class2NI and ensuring the marker is correct first - if you know the class2 marker is not in alignment and that needs correcting then that is an issue that needs sorting anyway i am sure you will not disagree - get info aligned correctly and resubmit return - i have seen the API data literally refresh in under 2 minutes when i have done this previously.

You seem to be completely ignoring the fact hmrc are not refusing amend the return - its simply the fact the NI marker needs to be correct before the computer can proceed to allow them to ensure things are in alignment.

As other have said however much you don't like the current situation there is a perfectly adequate and reasonable workaround that works. I would backup any motion to change things but only if its not at the expense of letting the ni and sa record get knowligly out of synch.

Being frank unless hmrc compeltely rewrite things your proposed solution of "allowing the ni to be out of synch" and ignoring that fact is not really a solution hmrc should think about entertaining for very obvioius reasons.

I won't argue with your points about the legislation but in life sometime a bit of give and take is needed - this may be forced in this area but i lok at the positive inh that if the ni record was wrong previously and that is corrected i have done a good deed for the day.

Thanks (0)
avatar
By richard thomas
28th Nov 2021 15:50

I’m responding here to recent posts by SteveHa and MUL. But I also agree with rmillaree that from the client’s perspective the overwhelmingly important thing is to get the payment of Class 2 recognised by the NICs computer as a contribution to their pension in the face of HMRC’s inability to design the policy properly and refusal to rectify the problem, especially if all it takes is notifying liability on a CWF1.

SteveHa’s original question is now elucidated as asking whether HMRC can legally put conditions on accepting an objection under s 9ZB(4). There is nothing that I can see in the thread which says what these conditions are, so I’m assuming that the condition is that the client must register for Class 2 using a CWF1. If that is not right, please Steve, say so.

The obvious and correct answer is “no they can’t”. The section is quite clear: if the taxpayer objects, the correction is of no effect. As to what you do if HMRC do not withdraw their amendment, the remedy is to amend your return (as amended by HMRC) back to what it was originally. This is said clearly in relation to the CT equivalent section in the Company Tax Manual at CTM93330. The Self-Assessment Manual at SAM 121530 also says that the 30 day rule is not enforced if the taxpayer is within the s 9ZA amendment window, implying that an objection can be given effect to by the taxpayer by an amendment.

You cannot appeal against a refusal by HMRC to re-amend, so do-it-yourself is the best course. HMRC manuals say that if there is an objection they have to open an enquiry if they wish to pursue the point. A naughty officer might argue that there is nothing in s 9ZB preventing two bites of the cherry (contrasting with s 9A(3) preventing more than one enquiry) and indeed they might point to that subsection as support for the view that if you amend your return as a result of your objection, they can correct it again (and see s 9ZB(3)(b)). Of course the amendment window (12 months from the filing date) is usually longer than the correction window (9 months from the actual date of filing), so you could always wait until the 9 months is up and then amend.

In their post of 24/11 18:12 MUL asks if Class 2 rules mirror those for income tax and CGT. Yes they do, and this is as a result of section 11A Social Security Contributions and Benefits Act 1992 inserted with effect for 2015-16 onwards.

“11A.—(1) The following provisions apply, with the necessary modifications, in relation to Class 2 contributions under section 11(2) as if those contributions were income tax chargeable under Chapter 2 of Part 2 of the Income Tax (Trading and Other Income) Act 2005 in respect of profits of a trade, profession or vocation which is not carried on wholly outside the United Kingdom–
(a) Part 2 (returns), Part 4 (assessment and claims), Part 5 (appeals), Part 5A (payment of tax), Part 6 (collection and recovery) and Part 10 (penalties) of the Taxes Management Act 1970;
(b) Schedule 24 to the Finance Act 2007 (penalties for errors);
(c) sections 101 and 102 of the Finance Act 2009 (interest);
(d) Schedules 55 and 56 to that Act (penalties for failure to make returns etc or for failure to make payments on time);
(e) Part 4 (follower notices and accelerated payments) and Part 5 (promoters of tax avoidance schemes) of the Finance Act 2014;
(ea) the provisions of Schedule 18 to the Finance Act 2016 (serial tax avoidance);
(f) any other provisions of the Income Tax Acts as to assessment, collection, repayment or recovery.

(2) But section 59A of the Taxes Management Act 1970 (payments on account) does not apply in relation to Class 2 contributions under section 11(2).”

Two things catch my eye here. How many tax avoidance boutiques are going to go in for promoting schemes to avoid Class 2 NICs? And who would want to avoid them, given the result would be that you might lose or reduce your state pension for the sake of £3 a week?

Secondly, given subsection (1)(f), why not just say in subsection (1) that the Income Tax Acts apply to Class 2 NICs as they apply to profits of trades carried on wholly in the UK.

MUL raises the question of whether HMRC can legitimately use s 9ZB in the circumstances here. In my view they cannot, as the return as described by SteveHa is correct and therefore with no error, let alone an obvious one. The second ground for a correction is that the officer has reason to believe that anything in the return is incorrect (even though not an obvious error).

“Reason to believe” means that it is a subjective matter, like “has reason to suspect” that an offence has been or will be committed (see the Michael Barrymore v Essex Police case). That brings me on neatly to MUL’s asterisked point in their post of 26/12 at 20:38.

This prompts the question: “What is the remedy where a purported s 9ZB correction is not one that HMRC may make?” The only answer is that it is the same as what it is if the correction is one did involve an obvious error or a reasonable belief by an officer that something was incorrect – object and amend.

There are two UT decisions of possible precedent value in this area. The first is Rogers & Shaw where the UT reviewed Nigel Popplewell’s FTT decisions that if the officer was not named on the notice to file (NTF), the notice was invalid and that the appeals against late filing penalties were to be allowed. One point raised in argument in the UT decision was the provision in s 8 TMA requiring the return to be delivered to that same officer.

The UT held that the officer did not have to be named on the NTF. It said at [32] ff:

“32. In our judgment, properly construed, s8 does not impose a requirement that an officer of the Board is identified in the notice as the giver of the notice. Rather, it imposes a substantive requirement that the giving of a notice must have been under the authority of an officer of HMRC. Therefore, if a police constable, for example, purported to require a taxpayer to submit a tax return that would not be a lawful request under s8 (unless the police constable happened also to be an officer of HMRC). Instead, the requirement is that whoever requires the notice to be given, whether identified or not, has the status of an HMRC officer.

33. The FTT considered that s8(1)(a) of TMA requires a return to be delivered to “the officer”, being the same officer who gives the s8 notice and relied on this conclusion as supporting its decision that the s8 notice had to be given by an identified “flesh and blood” officer. However, the statutory scheme as a whole does not justify this approach. By virtue of s2 of the Commissioners for Revenue & Customs Act 2005 (“CRCA”), the “officers” of HMRC are those staff that the Commissioners of Revenue & Customs have appointed for the purposes of exercising the Commissioners’ functions. Section 2(4) of CRCA provides that anything commenced by one officer can be continued by another. Moreover, s113(1A) of TMA provides that:

(1A) Any notice or direction requiring any return to be made under the Taxes Acts to an inspector or other officer of the Board may be issued or given in the name of that officer or, as the case may be in the name of the Board, by any officer of the Board, and so as to require the return to be made to the first-mentioned officer.

34. Against that background, s8 cannot be construed as requiring an identified officer to give a notice requiring a return to be given to that very officer.”

That seems to me a sensible decision in the context of a tax system which has evolved since 1970 so that there are no longer tax districts and District Inspectors who used to put their name on the returns that included an NTF (it was in my time pre-printed of course – I did not as DI actually sign the outgoing returns in ink) but a mass issue of NTFs in which the selection of the recipients is made by a computer in accordance with criteria determined by officers of HMRC. Though I do wonder if it’s as complicated as that. In the mass issue of NTFs on or about 6 April, a return will be issued to any and all persons who have notified liability to tax on the profits of trades (by so-called registration for self-assessment) or who were issued one in the previous year and who have are still on the system. There is in effect no “decision” at all here, so whether it is an automated decision or not is not relevant.

What Rogers & Shaw did not decide is (a) whether an automated decision ie by a computer can be made at all and (b) whether an automated decision can be made where the person giving it has to believe something or form an opinion about something.

On decisions made by a computer we have an obiter statement at [18] in Donaldson in the Court of Appeal (Lord Dyson MR):

“In my judgment, a generic policy decision of the kind taken by HMRC in June 2010 is a decision which satisfies the requirement of para 4(1)(b). I do not, therefore, need to deal with Mr Vallat's alternative submission that para 4(1)(b) is satisfied by HMRC's computer, programmed in accordance with that policy decision, automatically issuing a penalty notice. I must confess to having considerable doubts as to whether it is correct.”

I am unaware of any case in which Lord Dyson’s doubts have been discussed. My own view is that the doubts are not in fact valid, if the question is “can a computer make a decision?”, and it is to be noted that paragraph 4(1)(b) Schedule 55 FA 2009 is different from s 8 TMA, as in the latter, no decision is involved as I have pointed out.

There is a contrast in legislative activity in this area which is well worth my repeating – I seem to have done so ad nauseam in various fora. The DWP and HMRC seem to have radically different views when it comes to automation of decisions. As far back as 1998 legislation was enacted in the Social Security Act 1998 which said:

“2 Use of computers
(1) Any decision, determination or assessment falling to be made or certificate falling to be issued by the Secretary of State under or by virtue of a relevant enactment, or in relation to a war pension, may be made or issued not only by an officer of his acting under his authority but also—

(a) by a computer for whose operation such an officer is responsible; …”

The explanation by the sponsoring minister in Parliament of the need for this section was that while admittedly a computer could make a decision, it was neither the Secretary of State [no jokes or witty remarks, please] nor an officer acting under their authority.

That a computer can make decisions is a fundamental feature of aspects of GDPR (now UK GDPR) and in particular article 22 UK GDPR and s 14 Data Protection Act 2018. (I have a complaint with the ICO at present about HMRC’s apparent failure to comply with section 14 in a notice of automated PAYE coding, as against DWP’s obvious compliance in the letter about my winter fuel allowance).

The provisions in s 2 SSA 1998 have not been included in any Finance Acts or even NICs Acts (ironically, s 2 applied to NICs for a brief period, before the transfer of responsibility to IR, who adopted much of the social security legislation but not s 2.)

In my view then a decision made by HMRC’s computer is not valid as the Tax Acts require either an officer or HMRC to make a decision.

This brings us to s 103 FA 2020. I have commented on this in other fora, including in my capacity as a member of the Tax Law Review Committee of the Institute of Fiscal Studies and their submissions in relation to the Finance Bill. I have also published a Finance Bill Note in the British Tax Review on it, and I can email a copy to anyone here who sends me a private message (but they must not use it for commercial purposes – as if!). Essentially I said that s 103 does no more than confirm the narrow decision in Rogers & Shaw.

That then brings me to Allam. In that Mr Allam, the owner of Hull City FC, was arguing that the enquiry into his tax affairs was invalid, because it was opened in response to a s 8 notice that was automated and not made by an “actual officer” [15]. Most of the argument concerned whether, if it was invalid, section 12D TMA about voluntary returns did not help HMRC.

On the automation point, the FTT (Judge Ashley Greenbank and Rayna Dean) said:

“18. It has also been the practice for HMRC for some time to issue notices to taxpayers to file a return through an automated process without the notice having been reviewed or specifically authorized by an actual officer of HMRC. At the time of the hearing, there were appeals pending before the Upper Tribunal against decisions of the First-tier Tribunal which called into question the validity of automated notices, and in particular, whether an automated notice could be regarded as a notice to file a return ‘given to [a person] by an officer of the Board’ within s8 TMA.”

and

“28. Dr Allam’s returns were made in response to automated notices issued by HMRC. The question as to whether or not returns made by taxpayers in response to automated notices met the requirements of s8 (without the need for them to be treated as returns under s8 TMA by s12D TMA) was in issue in the Rogers and Shaw case before the Upper Tribunal. The Upper Tribunal (Zacaroli J and Judge Richards) decided that a notice did not have to be given by an identified ‘flesh and blood’ officer of HMRC in order to meet the requirements of s8 TMA; it was sufficient that the giving of the notice was under the authority of an officer of HMRC (Rogers and Shaw [32]).”

The UT (Edwin Johnson J and Judge Jonathan Richards) held that the FTT was wrong to have held that the appeal failed on the basis of Rogers & Shaw, but that was because the procedure adopted by the FTT after the publication of the decision was unfair. But HMRC pointed out that s 103 FA 2020 had changed the landscape retrospectively.

For Mr Allam it was argued in response to HMRC on s 103 that all it did was to allow any officer or Commissioner to do what an officer was permitted to do by legislation, and not to take away the requirement for oversight by an officer (as confirmed in Rogers & Shaw).

The UT disagreed, and in support of their view quoted the Explanatory Notes in support. But they do not in fact support the UT’s decision. In paragraph 8 of the EN the reference is to “repetitive, labour intensive administrative tasks, including issuing certain statutory notices.”

Given that Rogers & Shaw was the stimulus for the legislation that makes complete sense, but that sense is then vitiated by the inclusion in the section of things like s 29 TMA which requires an opinion or belief of an officer.

But in the end it does not matter as the issue in this post is not, or should not be, a “repetitive, labour intensive administrative task[ ]” as s 8 is. The UT in Allam came to the right answer but not necessarily for the right reasons (shades of the Morecambe/Previn reference in Tooth (FTT)).

Thus my view is that at least when they rely on s 9ZB(1)(b) HMRC cannot simply automate the decision by creating an algorithm that spots cases where there is an entry for Class 2 on the return but no marker for it on the NICs computer, and without further intervention issues (wrongly) an amended return and self-assessment.

Thanks (0)
Replying to richard thomas:
avatar
By More unearned luck
30th Nov 2021 20:27

Thanks for the long but v interesting post.

The link below is to an article from Tax Journal last year about s 103. The authors take a different view to that of Lord Dyson and seem to take it for granted that HMRC can use artificial intelligence (annoyingly without defining what that they mean by that term) to make decisions just as soon as HMRC get around to reprogramming their systems. This year's Reith lectures are on AI, so perhaps listening to Prof Stuart Russell will give us a clue as to what the authors had in mind.

If AI of any hue is to used by HMRC, the Charter will need to be rewritten as currently HMRC promise consideration of the taxpayer's case by flesh and blood officers with the right level of expertise.

https://www.traverssmith.com/media/6265/tj_2020_issue1501_sept_manning.pdf

Thanks (0)