reports that the UK Supreme Court has confirmed that
HMRC has the right to withhold tax relief and demand
payment of a tax debt while investigating what HMRC believes
to be a tax avoidance scheme.
The judgement reverses the decision of the Appeal Court in relation to
test case, in which it was argued that a taxpayer has the
right to amend a tax return to carry back employment loss relief, and
that HMRC had been wrong to bring collection proceedings without first
allowing an appeal to the tax tribunal.
The issue rested on the jurisdictional boundary between the tax
tribunal and the ordinary courts. In this instance, the claimant (Maurice Cotter) had
allowed HMRC to calculate his tax owed for 2007-08, and his claim for
loss relief took the form of an amendment to his tax return for that
year submitted in January 2009 in which he referred to losses incurred
The judges reasoned that a claim for relief in respect of losses
incurred in 2008-09 did not alter the tax chargeable or payable in
relation to 2007-08, and that therefore the county court and the High
Court had jurisdiction rather than the tax tribunal. This was because
the taxpayer was not appealing against a tax assessment in respect to
a particular year, but, rather, whether losses incurred in 2008-09
constituted a defence against HMRC's claim for immediate payment in
relation to tax it had calculated as owed in relation to 2007-08.
Further, a provision in the Taxes Management Act by which relief can
be given while a tax inquiry is underway (Section 9A) did not apply
because the claimant had allowed HMRC to calculate the amount of tax
owed and his amendment was not relevant to the calculation of tax for
that year. This meant that the amendment was not itself part of the
"return," as defined in the provision.
The ruling means that the taxpayer must perform a calculation of the amount of tax due him/herself,
rather than leave that calculation to HMRC, in
order to retain possession of funds under dispute.
Tax does have to be taxing.
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