Voluntary tax return not subject to enquiry and penalties- HMRC own goal

Voluntary tax return not subject to enquiry and penalties- HMRC own goal

Fri 04 Mar 2016

The First Tier Tribunal (FTT) has found that HMRC cannot enforce collection of tax included in a notice of closure or penalties for careless inaccuracy where a return is filed without HMRC having first issued a valid notice requiring a return. The lynch-pin point around which the case of Alexander Revell v HMRC [2016] UKFTT 97 (TC) revolves is the fact that HMRC effectively failed to serve a valid Notice upon him under Section 8 Taxes Management Act 1970 (TMA) to require him to make a return and, because of that failure, they were then prevented from making a Determination under TMA s 28C, or enquiring into the Return that was voluntarily submitted, or issuing a closure notice for what was, in effect, an invalid enquiry. There are some peculiar facts to the case that relate to HMRC sending a tax return to the wrong address – the taxpayer’s former address – but the decision may have extraordinary implications for any case where a taxpayer voluntarily submits a Self-Assessment Return. Under TMA s 115 allows a s 8 notice to complete a return is “given” as required  if it is sent to the taxpayer’s ‘usual or last known place of residence’. However, due to processing errors HMRC sent the 2008/09 s 8 notice to Mr Revell’s former address when they had been notified of a later one on both his P60 and the P45 filed by his former employer (Mr. Revell was a lower-league footballer who had moved clubs). When the blank return was sent back as undelivered from his old address HMRC recorded it as received but not signed, so it was sent back to him for signature – but again to the wrong address. Finally, in October 2012, a duplicate return was sent to Mr. Revell but it did not contain a date of issue, or his name or address. After further correspondence with Mr. Revell’s agent HMRC issued a determination of tax due under TMA s 28C on the purported basis that he had failed to respond to the s 8 notice to file a return. Mr. Revell’s agent then filed a return form which HMRC treated as made in response to a s 8 notice. HMRC viewed this return as incorrect because the return included a “notional credit” of tax paid with which HMRC did not agree. HMRC therefore opened an enquiry into the ‘Section 8 Return”, followed by a closure notice and an amendment of the self-assessment, with a subsequent demand for payment and notice of penalty for a carelessly inaccurate return. Mr. Revell appealed saying that the return was not in response to a notice under s 8 but was “coerced” by HMRC’s tax demand. The argument for Mr. Revell was that the power to make a determination under s 28C can only be activated when a notice to file a return under s 8 has been delivered to the taxpayer. HMRC did not dispute that the only notices they had sent out were addressed to incorrect addresses and never reached Mr. Revell but maintained that as he had submitted a return voluntarily, he should be treated as having waived the formal notice requirement and to have made a s 8 return. HMRC argued that, if he had voluntarily made a s 8 Return then the subsequent powers of enquiry under s 9A and closure under s 28A came into play.

Was notice to file a return “given”?

S 28C is the only provision under which HMRC has the power to make a determination charging estimated amounts of tax in the absence of a completed s 8 return. Mr. Revell’s case was simply that as the return had not been validly sent to his usual or last known place of residence, he had not been formally served with a s 8 Notice. As a direct consequence, the return form that he submitted was as a response to coercion by HMRC and not a notice under s 8. Further, because he had not been served a s 8 Notice, the power to make a determination under s 28C could not apply. The FTT concluded that as no s 8 notice had been validly given HMRC had no power to apply s 28C. 

Had Mr. Revell actually submitted a return?

This was a crucial question: the FTT observed that HMRC had a policy of treating any unsolicited return as if it was made in response to notice under s 8. They did so for all purposes including issuing notices of enquiry and penalties for inaccuracy. HMRC claimed support for this practice in another FTT case, Giles Davis v HMRC (2011) but the FTT in Revell noted that Giles Davis did not set a precedent because the decision in one FTT case is not binding on the FTT in a later case; and in Giles Davis the question of whether s 28C could apply was not considered: it must have been taken as axiomatic that s 28C did apply. HMRC contended that Mr. Revell’s return should be regarded as a valid return that he made unsolicited and that by doing so he waived the requirement of notice under s 8. The FTT rejected this contention outright, holding that the legislation makes no provision whatsoever for voluntary returns or for s 8 to be waived. Instead the FTT concluded that the return form submitted by Mr. Revell was to be treated as him giving HMRC a notice of his chargeability in accordance with TMA s 7 and confirmed that HMRC were now time-barred to require a return (s 38). If HMRC had responded to the notice in the correct way, they would have had time to issue a s 8 notice in date and validly compelled a return. As it was there was no return/self-assessment for HMRC to enquire into or correct under s 28A and as a result the determination of tax due was invalid.


In the proceedings HMRC advised that they receive approximately 350,000 unsolicited returns each year. The decision in Revell casts serious doubt on HMRC’s power to enquire into an unsolicited return or amend such a return by a closure notice. As an aside, if HMRC fail to send a s 8 Notice to the taxpayer’s usual or last known place of residence, HMRC are clearly unable to make a determination under s 28C for failure to comply with a s 8 Notice. The first thing to say is that HMRC are highly unlikely to let this case rest unappealed: it may not set a binding precedent but it is highly persuasive and the clarity and simplicity of the FTT’s decision will make it hard to resist. Whatever the outcome, the decision appears to suggest a glaring hole in the legislation that prevents HMRC from enquiring into those returns that are made voluntarily. However, there may not turn out to be as many would-be claimants as might be imagined. Anyone who has voluntarily submitted a tax return form and paid tax, whether the tax ‘self-assessed’ or determined by HMRC needs to be aware that their ability to obtain repayment may be severely constrained.

Overpayment relief

A claimant who has paid the tax or received a determination prompted by his own voluntary return would have to rely on the overpayment relief provisions in TMA Sch. 1AB or 1A. These carry a general time limit of four years from the end of the year in question, i.e. the same time limit as HMRC has for issuing a s 8 notice requiring a return. Therefore any case within date for an overpayment relief claim would also be in date for HMRC to issue a s 8 notice.

Special relief

Taxpayers who have overpaid, especially in cases involving HMRC determinations, may be able to use special relief, for which there is no statutory time limit but other restrictions apply. In particular there are three conditions to satisfy: A – in the opinion of the Commissioners it would be unconscionable for HMRC to seek to recover the amount which has been charged by a determination, or refuse to repay it if it has already been paid; B – the person’s tax affairs are otherwise up to date or arrangements have been made to the satisfaction of the Commissioners to bring them up to date as far as possible; and  C – the person has not previously claimed special relief or sought equitable liability – whether or not relief was given.

Unpaid tax demands

If the taxpayer has received a determination from HMRC but can show that they were not served with a notice (to their usual or last known address), or if HMRC are trying to collect tax entered on a voluntary return and self-assessment that remains unpaid, the taxpayer may be able to resist HMRC’s demands and efforts to enforce the debt through the normal courts, i.e. not the tax tribunals. However, this option will not be of use to anyone who has paid the tax.


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