In Smith Homes v HMRC [2020] TC7914, an attempt to use an Overpayment relief claim to try and facilitate a late claim for SDLT relief failed to extend the statutory deadline for amending a claim in a return. The claim invalidated HMRC's enquiry process but the First Tier Tribunal (FTT) unravelled the resultant mess and found for HMRC.
- The company purchased an office building and completed its Stamp Duty Land Tax (SDLT) return and paid SDLT at non-residential rates.
- Some 14 months later it made a claim for a tax repayment on the basis that Multiple Dwellings Relief (MLR) should have been claimed.
- The MDR claim was on the basis that the property had the benefit of permitted development to convert the office building to 33 residential units at the date of purchase. Whether this was potentially a valid claim or not was not the subject of this appeal.
- It was too late to amend its SDLT return as in most cases a taxpayer has 12 months to correct a filed SDLT return so the company claimed Overpayment relief, requesting a repayment of SDLT as the land transaction return was completed incorrectly.
- HMRC opened an enquiry into the return and denied the claim.
The FTT confirmed HMRC's position
- Overpayment relief has a four-year time limit however HMRC is not liable to give effect to the claim if where the amount paid is excessive by reason of a mistake consisting of the making or giving, or failing to make or give, a claim or election.
- As the claim for MDR has to be made in a land transaction return or an amendment of such a return, and the time limit for doing that had passed, it was too late make the MDR claim and no overpayment relief claim was possible.
The company’s appeal failed: the time limit to amend the return had passed.
The FTT then went on to consider further procedural aspects of the appeal, it found that:
- HMRC had opened an enquiry, in time, but it was invalid. The enquiry notice was issued under the wrong provision: it purported to be an enquiry into an amendment to an SDLT return and there was no amendment.
- A second enquiry notice was made under the right provision but it was invalid as it was out of time.
- It followed that the Closure Notice. that followed was also invalid as there was no valid enquiry in existence to determine.
- There was, therefore, no valid decision for the reviewing officer to review so HMRC's Statutory Review conclusion was also invalid.
- In addition, the reviewing officer addressed the wrong question: whether the transaction qualified for MDR and not whether HMRC should give effect to the repayment claim.
As there is no valid Closure Notice, there is no appealable decision and the appellant’s appeal is not therefore valid.
On the face of it the conclusion might be that if there is no valid enquiry and HMRC are out of time for opening one, they must make the repayment claimed.
However, the reference to a 'claim' must be to a valid claim to which HMRC are required to give effect. The SDLT return was out of time for amendment and so the claim was not valid. HMRC is not obliged to give effect to it. Accordingly, the appellant is not entitled to the refund of tax claimed.
And that, as they say 'was that'.
Useful guides on this topic
Overpayment relief
What is Overpayment relief? When can you claim Overpayment relief? What are the conditions for a claim for Overpayment relief? What are the time limits for a claim for Overpayment relief?
Stamp Duty Land Tax: Start here
What is SDLT? What are the SDLT rates? What is exempt from SDLT? What reliefs are available? When are returns due? When can you amend a return?
SDLT: Multiple Dwellings Relief
What is Multiple Dwellings Relief (MDR)? When does it apply and how is it claimed?
Closure Notice
When does HMRC issue a closure notice? Can a taxpayer demand one? Are there appeal rights?
Statutory Review
What is a Statutory Review? Is it automatic? What happens in a Statutory Review? Can you challenge a Statutory Review's findings? Can you influence a Statutory Review?
External links
Smith Homes v HMRC [2020] TC7914