In Salman and Asma Tufail [2020] TC7691, the First Tier Tribunal (FTT) dismissed appeals against HMRC’s refusal to allow late claims for trade loss relief. No enquiry had been opened so it did not have the jurisdiction to consider the refusal.
A claim for Overpayment relief may not be made more than four years after the end of the relevant tax year.
- A closure notice is a notice by an officer of HMRC informing the claimant that he has completed his enquiries and stating his conclusions.
- For a closure notice to be issued there must first have been a notice in writing issued by on officer of HMRC of an intention to enquire into the claim.
Mr and Mrs Tufail made overpayment relief claims for sideways loss relief on foreign property losses.
- The claims were late and made by way of letters to HMRC, not through their tax returns. There was written correspondence about the claims with HMRC debt management and their solicitors' office as HMRC had commenced bankruptcy proceedings against Mr Tufail.
- HMRC refused the claims on the grounds that they were out of time stating that there was no right of appeal against the refusal since, as in the Court of Appeal case of Raftopoulou, HMRC have never enquired into the claims so the refusal was not a closure notice.
- The taxpayers appealed: HMRC had given valid notice of an intention to enquire, enquired and issued a valid closure notice.
- The FTT confirmed the only matter to be determined was whether it had jurisdiction to consider HMRC’s refusal of the claims. They could not decide the validity of the loss relief claims until this jurisdiction had been established.
The FTT struck out the appeal:
- The claims were not made in any tax returns so their refusals did not involve the amendment of tax returns by HMRC, against which an appeal could have been made.
- Schedule 1A TMA 1970 could apply as the claims were made outside of a tax return but this only confers a right of appeal against a decision to disallow a claim within a closure notice.
- Raftopoulou, as a legally binding decision, makes clear a distinction between reviewing the face of a claim to decide whether it is in time, as opposed to “enquiring into” a return, which is a more in-depth exercise.
- Neither the correspondence with HMRC’s debt management team, that with the HMRC solicitors' office or the letter from the HMRC compliance officer stating that the claims were rejected as they were out of time, were written notice that HMRC intended to enquire into the taxpayers’ returns.
- As such there could be no valid closure notice meaning that there was no right of appeal under schedule 1A.
This case highlights the difference between a formal HMRC enquiry and informal correspondence with HMRC and the taxpayer's right of appeal, or lack thereof, against a decision contained in the latter. HMRC formal enquiries are rarely desirable but on this occasion, they may have been.
Links
Overpayment Relief
Overpayment Relief replaced the old 'Error or Mistake Relief' from 1 April 2010 (companies) and 6 April 2010 (individuals).
Losses, trade losses and sideways relief
How can trade losses be utilised? What are the restrictions?
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