The Commissioners for HM Customs and Revenue v Dr Vasiliki Raftopoulou
| Jurisdiction | England & Wales |
| Judge | Lady Justice Arden,Lord Justice David Richards |
| Judgment Date | 18 April 2018 |
| Neutral Citation | [2018] EWCA Civ 818 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2016/0670 & A3/2015/4210 |
| Date | 18 April 2018 |
[2018] EWCA Civ 818
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL
(TAX AND CHANCERY CHAMBER)
JUDGE BERNER AND JUDGE RAGHAVAN
FTC/148/2014
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice Arden
and
Lord Justice David Richards
Case No: A3/2016/0670 & A3/2015/4210
Hui Ling McCarthy and Christopher Stone (instructed by the General Counsel and Solicitor to HM Revenue and Customs) for the Appellant
Michael Thomas and Emma Pearce (instructed by the Bar Pro Bono Unit) for the Respondent
Hearing dates: 6 and 7 December 2017
This appeal arises from a claim for repayment of income tax. The respondent (the taxpayer) submitted her self-assessment return for the 2006–07 tax year on 14 January 2008, which showed a liability to tax of about £18,000, which she duly paid. Believing that her income had been overstated and her deductible expenses understated, she submitted a claim for repayment on 13 October 2011. The appellant (HMRC) rejected the claim as out of time.
The taxpayer lodged an appeal with the First-tier Tribunal (Judge John Brooks) (the F-tT). HMRC applied to strike out the appeal on the grounds that the F-tT had no jurisdiction to consider it. Following a hearing at which the taxpayer represented herself and HMRC was represented by a hearing officer, the F-tT acceded to HMRC's application and struck out the appeal. On appeal, the Upper Tribunal (Judge Berner and Judge Raghavan) (the UT) allowed the appeal on the basis that the claim was potentially within time and remitted the matter to the F-tT to determine whether or not the taxpayer had a reasonable excuse for submitting her claim out of time. HMRC appeals to this court with permission granted by the UT.
Two issues arise. The first is whether HMRC's rejection of the repayment claim gave rise to a right of appeal to the F-tT under paragraph 9(1) of schedule 1A to the Taxes Management Act 1970 ( TMA 1970). This turns on whether HMRC's letter rejecting the claim constituted a closure notice under paragraph 7(2) of schedule 1A. The second is whether section 118(2) TMA 1970 is capable of applying to a repayment claim made out of time, so as to permit the extension of the statutory time limit of four years for the making of such claims. The taxpayer had to succeed on both issues in order to pursue her appeal to the F-tT, and the UT held in her favour on both issues.
I will take each of these issues in turn, referring to the relevant legislative provisions and the relevant parts of the UT's Decision in respect of each of them.
The relevant facts can be shortly stated.
The taxpayer submitted her return for the 2006–07 tax year on 14 January 2008. She sent a letter dated 22 November 2008 to HMRC, stating that her income had been overstated and her deductible expenses had been understated and asking how she should proceed. As the UT recorded at [109], HMRC maintains that the letter had not been received. It formed no part of the taxpayer's appeal to the F-tT and the taxpayer was accordingly not permitted by the UT to raise any issue on it before them. The taxpayer made no amendment to her return under section 9ZA TMA 1970 within the permitted period of one year from “the filing date”, which expired on 31 January 2009.
The taxpayer sent a letter dated 13 October 2011 to HMRC, in which she made a claim for overpayment relief under schedule 1AB TMA 1970 in respect of the tax year 2006–07. HMRC replied by a letter dated 9 November 2011, so far as relevant, in the following terms:
“Thank you for your letter dated 13 October 2011. Please accept my apologies for the delay in replying.
It is now too late to make an amendment to the return for 2006–07.
From 1 April 2010 error or mistake relief under Section 33/33A TMA 1970 was replaced by overpayment relief as introduced by Schedule 1AB TMA 1970. The normal time limit for an overpayment relief claim is 4 years from the end of the relevant tax year. This means that the amendment is out of time and a repayment cannot be made.
You can find further information about overpayment relief claims through our Self Assessment Claims Manual at SACM 12000 onwards, which can be accessed through our website.”
It is common ground that the reference to “amendment” in the last line of the middle paragraph should have been to the taxpayer's request for repayment.
Further correspondence followed in 2013, resulting in a review by HMRC of the earlier correspondence and confirmation, in a letter dated 31 July 2013, of the decision notified in November 2011.
I turn therefore to the first issue, whether an appeal lay to the F-tT against HMRC's rejection of the taxpayer's claim, notified by their letter dated 9 November 2011.
The relevant statutory provisions are as follows.
Under paragraph 1 of schedule 1AB TMA 1970, a person who has paid an amount by way of income tax and who believes that the tax was not due may make a claim for repayment. Paragraph 3(1) provides that a claim may not be made more than four years after the end of the relevant tax year. It is common ground that in this case the period of four years expired on 5 April 2011.
Paragraph 1(4) of schedule 1AB provides that, among other provisions, schedule 1A TMA 1970 applies for “making and giving effect to claims under this Schedule”.
Paragraph 4(1) of schedule 1A provides that, subject to (among other provisions) paragraph 4(3), HMRC shall as soon as practicable after a claim is made give effect to it by repayment of tax. Paragraph 4(3) provides that paragraph 4(1) does not apply where a claim “is enquired into by an officer of the Board”.
Paragraph 5 of schedule 1A, headed “Power to enquire into claims”, provides in paragraph 5(1) that an officer of the Board “may enquire into” a claim “if, before the end of the period mentioned in sub-paragraph (2) below, he gives notice in writing of his intention to do so” to the person making the claim. The end of the relevant period in this case, if the claim were made in time, was the quarter day after the first anniversary of the day on which the claim was made.
As originally enacted, paragraph 6 of schedule 1A conferred power on HMRC to call for documents for the purposes of an enquiry opened under paragraph 5. Paragraph 6A (introduced by the Finance Act 1998) provided for appeals against notices to produce documents. Paragraphs 6 and 6A were repealed by the Finance Act 2008 and the equivalent provisions are now contained in that Act.
Paragraph 7 provides for the completion of an enquiry into a claim. Paragraph 7(1) provides that an enquiry under paragraph 5 “is completed when an officer of the Board by notice (a “closure notice”) informs the claimant that he has completed his enquiries and states his conclusions”. In the case of a claim for discharge or repayment of tax, the closure notice must “either (a) state that in the officer's opinion no amendment of the claim is required, or (b) if in the officer's opinion the claim is insufficient or excessive, amend the claim so as to make good or eliminate the deficiency or excess”. A closure notice takes effect when it is issued: paragraph 7(4). Within 30 days of the issue of a closure notice, HMRC must give effect to it: paragraph 8.
An appeal to the F-tT lies against any conclusion stated or amendment made by a closure notice, within 30 days after the date on which the closure notice was issued: paragraph 9.
The taxpayer's case, which was accepted by the UT, was that HMRC's letter dated 9 November 2011 constituted both notice of an enquiry under paragraph 5 (an enquiry notice) and a closure notice under paragraph 7. The taxpayer was therefore entitled to appeal to the Ft-T against the rejection of her claim as made out of time. Otherwise, it was agreed, her remedy to challenge the rejection would be by way of judicial review (and, also, it was suggested on behalf of the taxpayer, by a civil claim but this alternative was not developed in argument).
It was common ground before the UT, and before us, that there was no prescribed form for an enquiry notice or a closure notice. To be effective, an enquiry notice or a closure notice must be understood by a reasonable person in the position of the intended recipient (the taxpayer in this case), having that person's knowledge of any relevant context, as giving notice of an intention to enquire into a claim or close an enquiry (as the case may be): see the judgment of this court in HMRC v Bristol and West PLC [2016] EWCA Civ 397; [2017] 1 WLR 2792, at [26].
The UT started their consideration of this issue by referring to the decision of the UT in Portland Gas Storage Ltd v Revenue and Customs Commissioners [2014] UKUT 270 (TCC); [2014] STC 2589 ( Portland Gas), which concerned very similar provisions relating to a claim for repayment of stamp duty land tax. At [42], the UT in that case considered the meaning of “enquire into” a claim and said:
“It is helpful to consider the ordinary meaning of ‘enquire’ and ‘enquiring’. We were referred to various dictionary definitions. The words are synonymous with ‘inquire’ and ‘inquiring’ and it is clear to us that in the context in which we are considering the term, that is in relation to legislation that gives HMRC power to verify information contained in a return so as to ascertain whether the correct amount of tax has been paid, it must mean ‘examine’, ‘investigate’ or ‘make an investigation into’. Another synonym would be ‘scrutinise’.”
In Portland Gas, HMRC had rejected a claim for repayment on the grounds that it was made out of time, and it had done so in a single letter dated 15 August 2012. As to this letter, the UT said at [44]:
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Hunter
...in Pattullo is not obiter. A decision of the Upper Tribunal is not binding on a later Upper Tribunal (see R & C Commrs v Raftopoulou [2018] BTC 17 at [24]). As a tribunal of coordinate jurisdiction the later tribunal will follow the decision of the earlier one unless it is convinced that th......
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Faulkner
...partner to previous tax year – Whether claim in return out of time – Yes – Whether appealable decision – No – R & C Commrs v Raftopoulou [2018] BTC 17 followed – Whether in time claim made outside return – Whether failure by HMRC to give effect to claim appealable – Effect of carry-back cla......
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Hemingway
...which suggests that the taxpayer might have a tax liability, constitutes an assessment. In Raftopoulou (R & C Commrs v Raftopoulou [2018] BTC 17), a case involving closure notices, the following was said by the Court of Appeal. [20] It was common ground before the UT, and before us, that th......
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Cumming-Bruce
...in Pattullo is not obiter. A decision of the Upper Tribunal is not binding on a later Upper Tribunal (see R & C Commrs v Raftopoulou [2018] BTC 17 at [24]). As a tribunal of coordinate jurisdiction, the later tribunal will follow the decision of the earlier one unless it is convinced that t......