TC09583 - [2025] UKFTT 00865 (TC)

Fecha: 28-May-2025

HMRC’s submissions

HMRC’s submissions

60.

HMRC start by framing the statutory framework of SDIL within HMRC’s duty to collect tax and the general powers that support them in that duty as provided for in section 25 FA 17, sections 5 and 9 of CRCA and section 12 IA and explained in R (oao JJ Management Consulting LLP and others) v HMRC [2020] EWCA Civ 784 (JJ Management Consulting):

“46.
First, as s 5 CRCA 2005 and s 1 TMA 1970 make clear, HMRC’s primary function is the collection of tax. That involves both a power and a duty to collect tax. The well-established principle of tax law to the effect that there is a public interest in taxpayers paying the correct amount of tax means that the duty to collect tax is to collect, as far as reasonably possible, the correct amount of tax rather than simply the tax that a taxpayer accepts is due (see if necessary, Tower M Cashback LLP 1 v Revenue and Customs Cmrs [2011] UKSC 19, [2011] STC 1143, [2011] 2 AC 457 (Lord Walker at [15]).
…
55.
… It is for HMRC to determine the best way facilitating collection of tax they are under a statutory duty to collect …”

61.

Against that context HMRC contend that they have a power to amend, reject, determine, or withdraw claims for tax credits because:

(1)

Such powers are implied within the terms of the primary legislation, in particular as a consequence of section 25(2) FA 17 which places responsibility for collection and management of SDIL with HMRC. In this regard, reliance is placed on the Supreme Court judgement in DCM. HMRC contend that the imposition of a duty to collect tax necessarily implies a power to do whatever is required in order to comply with the duty. It was stated that it followed that to determine if the right amount of SDIL had been collected HMRC’s powers must necessarily include the power to determine tax credits; otherwise it would render impossible the ability to arrive at the right amount of SDIL in circumstances in which tax credits were involved. The absence of an express power to determine tax credits is the necessary precondition to finding that such powers may be implied.

(2)

Further, such implied powers were derived under the Regs; in particular regulations 19 to 21 and 23 interpreted in the context of paragraphs 1 to 7 of Schedule 8 FA17 and interpreting these provisions to give effect to Parliament’s purpose in the context of the statute as a whole, its historical context and the provisions of the IA. The Regs are said to provide the mechanism for the collection of SDIL thereby implying that HMRC have all the powers necessary for the proper administration of that regime with the requirements on a liable person to account for SDIL being mirrored in the collection regime provided for in Schedule 8 FA 17. Specifically, HMRC contend that the provisions of Schedule 8 impute a power for HMRC to verify SDIL returns which necessarily requires a power to determine entitlement to tax credits and to then assess if there is SDIL due from the taxpayer.

(3)

A conclusion that HMRC have no power to determine tax credits is contrary to commonsense and the purpose of the legislation because it would open the statutory scheme for SDIL to fraud by allowing taxpayers to benefit from tax credits to which they are not entitled. It would give rise to an absurd outcome that HMRC could not collect SDIL properly due to them where liable persons claimed tax credits to which they were not entitled. Where competing interpretations of the provisions exist, an interpretation that does not lead to an absurdity should be preferred.

62.

On the basis that the necessary power to determine tax credits is inferred HMRC contend they are entitled to raise the Assessments all of which fall within the statutory time limit of four years as provided for in paragraph 6 Schedule 8 FA 17. The two-year time limit to which the Appellant refers is one imposed by Parliament on late claims to tax credit and/or overpayments. There is no requirement for parity between time limits, and Parliament chose what time limits, if any, were to apply in the different scenarios arising.

63.

HMRC contend that the Assessments are valid for the following reasons:

(1)

There was no entitlement to the SDIL credits claimed (as accepted for the purposes of this appeal).

(2)

The Appellant wrongly self-assessed itself to SDIL credits to which it was not entitled.

(3)

The allocation of SDIL credit as claimed on a return involves no recognition of the validity of the claim. Drawing a parallel to a claim to be paid a VAT credit and relying on the judgment of the Court of Appeal in R (on the application of UK Tradecorp Ltd) v HMRC [2004] EWHC 2515 (Admin) (Tradecorp)it is not until a claim is “admitted or upheld” that it gives rise to an entitlement to repayment.

(4)

In consequence of the claim to credit and the mechanism of calculating the SDIL payable, and therefore that due for payment, the Appellant’s incorrect claim to credit leaves an amount of SDIL due which HMRC are entitled to assess.

(5)

The Assessments do not duplicate other sums declared in the Appellant’s returns.

(6)

The formal requirements for an assessment have been met.

64.

HMRC counter the jurisdictional challenge by contending that the Assessments represent the basis on which the Appellant’s entitlement to a SDIL credit has been determined; such decision meeting the description in paragraph 1(n) Schedule 10 FA 17 and thereby subject to the limited jurisdiction provided for under paragraph 15. Alternatively, there is a decision under paragraph 1(a) or (f).