The Court of Appeal has struck out the taxpayer’s appeal against HMRC’s rejection of a late claim for repayment of overpaid tax.
The taxpayer in this case submitted a claim for repayment of income tax overpaid, which HMRC rejected as being out of time. The taxpayer appealed on two issues – firstly, that the letter from HMRC rejecting the claim constituted an enquiry closure notice, against which the taxpayer had a right of appeal to the First-tier Tribunal (FTT). The second issue was whether the defence of reasonable excuse could apply to a repayment claim made out of time. The Court of Appeal has overturned the Upper Tribunal’s (UT) decision, finding that the FTT was correct in deciding that it lacked jurisdiction to hear the taxpayer's appeal, which should therefore be struck out.
In its decision, the Court of Appeal addresses the two issues raised by the taxpayer as follows:
Had HMRC opened and subsequently closed an enquiry?
The Court of Appeal rejected the taxpayer’s claim that the letter from HMRC refusing the repayment was simultaneously the opening of an enquiry and the closure notice of the same said enquiry. The letter did not demonstrate that HMRC had conducted an enquiry into the claim or that they ever intended to – just that they had rejected the claim as made out of time. The judgment, in common with the view of the UT in Portland Gas, found that a rejection of the claim on the basis that it was out of time did not use HMRC’s statutory enquiry powers.
The Court noted that the taxpayer was entitled to make a judicial review claim in the absence of a statutory right of appeal, and that this was an adequate remedy.
Could ‘reasonable excuse’ apply to a repayment claim made out of time?
The legislation allows for a four year period to make a claim for relief from overpayment of tax, and there is no specific provision which permits an extension to this period. Section 118 TMA 1970 provides that where a person had ‘a reasonable excuse for not doing anything required to be done’ he is deemed not to have failed to do it if he did it without unreasonable delay after the excuse ceased. The Court agreed with HMRC that the application of this section is limited to acts that a taxpayer is required to perform under mandatory taxation provisions, not ones that he or she is permitted but not required to take. The Court also considered that the effect of the deeming provision was limited to relieving the person of the consequences of his failure and did not extend to deeming the person to have done the act in question.
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