Rupert Grint v The Commissioners For Her Majesty's Revenue & Customs, TC 05286
| Jurisdiction | UK Non-devolved |
| Judge | Barbara MOSEDALE |
| Judgment Date | 03 August 2016 |
| Neutral Citation | [2016] UKFTT 0537 (TC) |
| Respondent | The Commissioners For Her Majesty's Revenue & Customs |
| Appellant | Rupert Grint |
| Reference | TC 05286 |
| Court | First-tier Tribunal (Tax Chamber) |
[2016] UKFTT 0537 (TC)
TC05286
Appeal number: TC/2014/6301
INCOME TAX – whether appellant met criteria in s 217 ITTOIA for a
change in accounting date – meaning of ‘accounts’ – whether various
financial statements were accounts - appeal dismissed
FIRST-TIER TRIBUNAL
TAX CHAMBER
RUPERT GRINT Appellant
- and -
THE COMMISSIONERS FOR HER MAJESTY’S Respondents
REVENUE & CUSTOMS
TRIBUNAL:
JUDGE BARBARA MOSEDALE
Sitting in public at the Royal Courts of Justice, London on 27-29 June 2016
Mr P Soares and Mr I Afzal, Counsel, for the Appellant
Ms S Choudhury, Counsel, instructed by the General Counsel and Solicitor to
HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2016
2
DECISION
1. The appellant appeals against amendments made to his tax returns for the years
ended 2010 and 2011 in closure notices issued by HMRC.
The dispute 5
2. Without considering the sections in detail, as it was not in dispute, a trader pays
tax on his profits from a trade in relation to ‘basis periods’. The normal basis period
is the 12 months ending with the accounting date which falls in the tax year. So in
this case, as the appellant had an annual accounting date of 31 July, he paid tax in tax
year 08/09 on his profits in the 12 month period to 31 July 2008; and there was no 10 issue with HMRC with respect to that year. If he left his accounting date unaltered,
he would be liable to pay tax in tax year 09/10 on the profits of the 12 months’ to 31
July 2009. But the basis period alters if the accounting period is effectively altered
for tax purposes.
3. In 2009/10 the appellant decided on advice to change his accounting date to 5 15 April and so bring into account in that tax year income earned in the 20 month period
1 August 2008 to 5 April 2010. In other words, he intended to have a 20 month,
rather than 12 month, basis period in 09/10.
4. Tax law recognises changes in accounting dates if certain conditions are met.
Section 216 Income Tax (Trading and Other Income) Act 2005 (‘ITTOIA’) permitted 20 the appellant to bring into account for tax purposes the income he earned from 1
August 2008 to 5 April 2010 (20 months) in tax year 2009/2010 if the conditions set
out in s 217 ITTOIA were met. If they were not, the change in accounting date would
not be recognised.
5. Having the change in accounting date recognised would have the effect for the 25 appellant, as I have said, that 20 months’ income would fall to be taxed in 2009/10.
In other words, the effect would be to bring forward the appellant’s liability to tax on
8 months’ income which, if he had not changed accounting date, would not have been
subject to tax for another 12 months, in tax year 10/11. (And the effect continues
through the tax years, bringing forward to the earlier year liability to pay tax on 30 income earned between 1 August (the day after the end of the old accounting date)
and 5 April (the new accounting date).)
6. At first glance, it might not seem advantageous to a taxpayer to do this but the
quid quo pro of bringing forward to 2009/10 the liability to the tax on this eight
months’ worth of income was that this took that income out of tax year 2010/11. This 35 was advantageous because a new top rate of 50% took effect in 2010/11, whereas
2009/10 was the last year where the top rate remained 40%. Therefore, if the change
in accounting date was effective, this would result in a saving of 10% of the income.
7. HMRC did not challenge in any way the appellant’s right to change his
accounting date: the dispute arose because HMRC did not accept that the appellant 40
3
had actually effected a change in his accounting date. The dispute centred on whether
or not the conditions in s 217 ITTOIA were met.
The law
8. Section 217 ITTOIA so far as relevant provided:
Conditions for basis period to end with new accounting date 5
(1) The conditions in this section are met if –
(a) the person carrying on the trade gives appropriate notice of the
change of accounting date to [HMRC] (see subsection (2)),
(b) the 18 month test is met (see subsection (3)), and
(c) either condition A or condition B is met (see subsections (4) to (6)). 10
9. There was no dispute as to the meaning of accounting date, which was contained
in s 197 ITTOIA as follows:
(1) In this chapter ‘accounting date’, in relation to a tax year, means-
(a) the date in the tax year to which accounts are drawn up, or
(b) if there are two or more such dates, the latest of them. 15
10. It was accepted that notice of the change in accounting date was given in the
appropriate form to HMRC so condition 217(1)(a) was met; it was also accepted that
Condition A was met so condition 217(1)(c) was met. Condition A required the date
of any previous change in accounting date to be more than 5 years earlier: the
appellant had not changed his accounting date since he commenced trading in 2000 20 and so Condition A was met.
11. The dispute centred on condition 217(1)(b) and whether the 18 month test set out
in 217(3) was met. That was as follows:
(3) The 18 month test is met if the period of account ending –
(a) with the new accounting date in the tax year in which the change of 25 accounting date occurs, ...
(b) [not relevant]
is not longer than 18 months.
12. The definition of ‘period of account’ was in s 989 Income Tax Act 2007 (‘ITA’)
as follows: 30
(a) in relation to a person, means any period for which the person
draws up accounts,
(b) in relation to a trade, profession, vocation or other business, means
any period for which the accounts of the business are drawn up....
13. In other words, for the change in accounting date to be effective, the appellant had 35 to show that his period of account to 5 April 2010 was not longer than 18 months, and
To continue reading
Request your trial