Situations where a tax claim made outside the normal time limit, can become valid

Situations where a tax claim made outside the normal time limit, can become valid

Mon 14 May 2018

The First tier Tribunal has held that, by HMRC raising an enquiry into a return filed after the deadline for making a capital allowance claim, the out of time claim becomes validly made as a result of FA 1998 Sch18 para 82(1)(b).

The tax legislation provides the ability for a taxpayer to make certain claims within a period after an enquiry or discovery assessment is made, so it is always worth considering making and filing claims, even if the claim is made outside the normal time limits.

Background

Dundas Heritable Ltd filed its corporation tax return for the year ended 31 March 2012 on 3 February 2015 instead of the statutory deadline of 31 March 2013. A similar situation applied for its corporation tax return for the year 31 March 2013, which was filed on 26 November 2015, as opposed to the filing deadline of 31 March 2014.  Both tax returns contained claims for capital allowances (£317,535 and £369,207 respectively), which were therefore outside the normal time limit for being made, of 12 months after the filing date for the company’s tax return.

HMRC raised enquiries into the capital allowance aspects of these returns on 12 April 2016 and issued closure notices and amended assessments on 16 September 2016, which amongst other things, disallowed the capital allowance claims on the basis the claims were out of time.

The time limits for making capital allowances claims is set out in FA 1998 Sch18 para 82:

82.—(1)  A claim for capital allowances may be made, amended or withdrawn at any time up to whichever is the last of the following dates—

(a)       the first anniversary of the filing date for the company tax return of the claimant company for the accounting period for which the claim is made;

(b)       if notice of enquiry is given into that return, 30 days after the enquiry is completed;

(c)       if after such an enquiry the Inland Revenue amend the return under paragraph 34(2), 30 days after notice of the amendment is issued;

(d)       if an appeal is brought against such an amendment, 30 days after the date on which the appeal is finally determined.

HMRC had argued that because the company had failed to file its corporation tax returns on time (so para 82(1)(a) was not met, that 8291)(b) – (d) could also not apply. The tribunal judge did not agree, and on a plain reading of the words decided that the time limit for the claim would be the later of any of the above.

Therefore, as a result of HMRC raising the enquiry, the deadline for making a capital allowance claim in this situation became the later of the 30 days after the date the enquiry was completed or the amendment issued (FA 1998 Sch18 para 82(1)(b) and (c)). Consequently the claims included in the tax returns became valid (as they were made before this deadline).

Provision for the making of late claims is also available in the case of discovery assessments (FA 1998 Sch18 para 65). HMRC’s enquiry manual guidance on time barred claims for companies (EIM3906) indicates the ability to make or amend claims in such circumstances.

It is possible for capital allowances to be claimed in a later period provided the asset is still owned and a qualifying activity is being undertaken, so even if the time limit had been missed, a claim might be possible in a later period.

To discuss the issues around making tax claims and elections, please get in touch with a member of the Mazars corporate tax or private client tax teams.

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