Buxton
| Jurisdiction | UK Non-devolved |
| Judgment Date | 13 August 2012 |
| Neutral Citation | [2012] UKFTT 506 (TC) |
| Date | 13 August 2012 |
| Court | First Tier Tribunal (Tax Chamber) |
[2012] UKFTT 506 (TC)
Judge Christopher Staker, Ms Anne Redston
Sarah Dunn of Counsel, instructed by Taxation Practical Service Limited, appeared for the Appellant
James Rivett of Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents
Income tax - claim for foreign tax credit relief for Guernsey tax - appeal against closure notice - whether valid claim made for one-ninth tax credits under ICTA, Income and Corporation Taxes Act 1988 section 231s. 231 - on the facts, no - jurisdiction of the tribunal considered
The First-tier Tribunal decided that a taxpayer's claim in respect of her dividend income taxed in the UK was for a foreign tax credit relief and not for a one-ninth tax relief under the Income and Corporation Taxes Act 1988 ("ICTA 1988"), Income and Corporation Taxes Act 1988 section 231s. 231. That legislation provided a different relief and did not operate by providing relief for dividends which had been subject to both UK tax and overseas tax. The fact that the relief under said legislation had been extended, by virtue of EU case-law, to encompass dividends received from certain overseas companies did not mean that such relief was a type of foreign tax credit relief. The Tribunal also held that the taxpayer's letters to HMRC were not an amendment to her original tax credit relief claim, but only the addition of a new claim "in the alternative". Neither did her said letters constitute a new claim for relief under ICTA 1988, Income and Corporation Taxes Act 1988 section 231s. 231 nor quantify the amount that she was seeking to claim in any new claim.
The taxpayer appealed against HMRC's decision, denying her claim for foreign tax credit relief in respect of the dividend she received in 2003. The dividend amounting to £25,000 was paid out of profits taxed in Guernsey.
In her 2003-04 self-assessment tax return, the taxpayer completed the box headed "foreign tax credit relief for foreign tax suffered" at page five of the foreign pages. She included £31,250 as the amount chargeable and £6,250 as the tax suffered, and then ticked the box claiming foreign tax credit relief.
On 26 May 2005, HMRC opened an enquiry into the taxpayer's tax credit relief claim and, on 7 July 2005, issued a closure notice denying her foreign tax credit relief. They then amended her tax return, increasing the tax due by £2,939.58. The taxpayer disputed the denial of her tax credit relief. However, HMRC maintained that the taxpayer's relief could only be allowed if the overseas tax charged represented tax which neither the company nor the taxpayer would have borne had the dividend not been paid.
After several hearings before the General Commissioners in 2006-07, the taxpayer wrote to HMRC on 11 June 2007 asserting that the denial of her relief from economic double taxation contravened the prohibition under the European Community Treaty, art. 56. She asked HMRC to take the fundamental point of the European law; otherwise, she would take the matter back to the General Commissioners. HMRC restated their decision on 13 November 2009, relying on the ICTA 1988, Income and Corporation Taxes Act 1988 section 790 subsec-or-para 5s. 790(5)(c)(i). On 9 December 2009, the taxpayer again stressed her point about the European law and her intention to appeal before the Tribunal. Subsequently, HMRC upheld their decision upon review.
Whilst the taxpayer accepted that she was not statutorily entitled to foreign tax credit relief under ICTA 1988, Income and Corporation Taxes Act 1988 section 790 subsec-or-para 5s. 790(5)(c)(i), she had, nevertheless, a valid claim to one-ninth tax relief under ICTA 1988, Income and Corporation Taxes Act 1988 section 231s. 231 ("the original claim argument"). It was the subsequent jurisprudence of the European Court that had made it clear that ICTA 1988, Income and Corporation Taxes Act 1988 section 231s. 231 should be "read down" to apply to certain foreign dividends. The quantum of relief originally claimed under ICTA 1988, Income and Corporation Taxes Act 1988 section 790s. 790 was more than the relief which would be given by way of an ICTA 1988, Income and Corporation Taxes Act 1988 section 231s. 231 claim, because the taxpayer was a higher-rate taxpayer.
The taxpayer argued that those problems did not prevent her claim in the self-assessment return from being a claim under ICTA Income and Corporation Taxes Act 1988 section 231s. 231. She said she had claimed relief from income tax on her Guernsey dividend and the appeal was against HMRC's refusal to allow that relief. If the EU law arguments were correct, then HMRC's adjustment to the tax return was wrong. She further submitted that she had appealed against the amendment to her return and that when that matter was under appeal, she could argue any point of law she thought appropriate.
The taxpayer also argued that by analogy, just as group relief was an umbrella term covering a number of possible types of relief, she claimed in her original tax return the "tax credit relief". It was an ambiguous term, the meaning of which could include double taxation relief or relief under ICTA 1988, Income and Corporation Taxes Act 1988 section 231s. 231. She said that it was clear from Gallic Leasing Ltd v Coburn (HMIT)TAX[1991] BTC 451 ("Gallic Leasing") that the claim did not need to identify the nature of the relief sought, just the profits against which it was claimed, the amount of the relief, and the claimant.
HMRC contended that the taxpayer's only claim was for foreign tax credit relief, as shown in her tax return. They argued that as it had been conceded that there was no valid claim for this relief so that their closure notice was correctly issued. The taxpayer had made no claim for relief under ICTA 1988, Income and Corporation Taxes Act 1988 section 231s. 231; hence, she was attempting to smuggle another claim inside the claim that had actually been made. If she wanted to make such a claim, she should have done so by completing page three of the foreign pages. Then, she could have explained in the white space of the return that she was claiming relief and was asking that the section be "read down" in compliance with the European law. HMRC said that double taxation relief was an entirely different form of relief from a claim for credits under ICTA 1988, Income and Corporation Taxes Act 1988 section 231s. 231 and was computed on an entirely different basis. Citing Gallic Leasing, there was no mandate for the taxpayer retrospectively to "construe" a claim made for relief under one statutory code as a claim for an entirely different relief under an entirely different statutory code.
The taxpayer said that the rejection of formalism shown in Gallic Leasing should also extend to amendments ("amendment argument"). One or both of the letters of 11 June 2007 and 9 December 2009 should be read as an amendment since it was clear that the amount of relief claimed remained as submitted in the tax return and that the legislative basis for that claim had changed. HMRC argued that the taxpayer could only amend her return during the period under enquiry and could not make an amendment after the closure notice had been issued. Since the closure notice in this case was issued on 7 July 2005, neither letter could constitute an amendment to the claim.
The taxpayer claimed that if neither of her first two arguments succeeded, then one or other of the letters of 11 June 2007 or 9 December 2009 constituted a free-standing claim to relief under ICTA 1988, Income and Corporation Taxes Act 1988 section 231s. 231 ("new claim argument"). The letters made clear the basis of the claim and that HMRC already knew their quantum because they had received the tax return. The taxpayer said that TMA 1970, Taxes Management Act 1970 schedule 1A subsec-or-para 2Sch. 1A, para. 2(1) required that the claim be made to an officer of the Board, and this requirement had been satisfied. She added that TMA 1970, Taxes Management Act 1970 schedule 1A subsec-or-para 2Sch. 1A, para. 2(3) required that the claim be in such form as the Board might determine was irrelevant as there was no prescribed form which a person could use to claim one-ninth tax credits for dividends from an overseas company. As for TMA 1970, Taxes Management Act 1970 schedule 1A subsec-or-para 2Sch. 1A, para. 2(4) and (5), she submitted that these were directed at HMRC, not at the taxpayer. Moreover, she said that if this was the Tribunal's finding, the consequence was that the claims had not been enquired into within the statutory deadlines, and so should be accepted in the amounts claimed.
HMRC contended that if either of the 11 June 2007 or 9 December 2009 letters constituted a new claim, that claim was not the subject of these appeal proceedings. The taxpayer's appeal before this Tribunal was against the closure notice issued on 7 July 2005. Thus, the Tribunal had no jurisdiction to consider whether the said letters constituted a new claim. This was the case despite the fact that the notice of appeal referred only to the taxpayer's EU law arguments and to the review decision rejecting the taxpayer's submissions on these EU law points. Under TMA 1970, Taxes Management Act 1970 section 31s. 31, no right of appeal was provided against a review decision.
HMRC submitted that neither letter constituted a new claim. If the taxpayer had wished to claim relief under ICTA 1988, Income and Corporation Taxes Act 1988 section 231s. 231, then she was required to follow the statutory procedures. Neither did the 11 June 2007 nor 9 December 2009 letters quantify the claim; hence the statutory requirements were not met. HMRC pointed to the difference between those two letters and said that the claim was not quantified until 21 April 2010, when the agent provided a schedule quantifying the relief claimed and its effect on the taxpayer's liability.
(2) Whether the...
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