Upper Tribunal Tax and Chancery Chamber

UT (Tax & Chancery) UT-2024-000113 - [2025] UKUT 00165 (TCC)

Fecha: 08-Abr-2025

Cotter

Cotter

94.

At [64] the FTT explained the issues in Cotter:

64.

In relation to the effect of the claim on Mr Murphy’s return, we turn first to the Supreme Court decision in Cotter. That case involved a claim for employment loss relief for a loss sustained in the tax year 2008/9, but carried back to the tax year 2007/8. The taxpayer’s return for the tax year 2007/8 was initially filed in paper form. In that return, the taxpayer did not claim the relevant loss and did not calculate his own tax liability for the year, but left it to HMRC to do so. The claim to carry back the loss to the tax year 2007/8 was subsequently made by the taxpayer’s accountants on his behalf. The accountants also submitted an amended return for the tax year 2007/8. HMRC sought to enquire into the claim under Schedule 1A TMA.

95.

At [24]-[26] of Cotter, Lord Hodge rejected the taxpayer’s argument that the claim was made in the return because Mr Cotter had not calculated the tax which he was due to pay as part of his return. For the purposes of s.8(1) TMA, a return refers to the information in the return submitted by the taxpayer as to the amount of tax chargeable and payable and therefore it was a claim made outside the return to which Schedule 1A TMA applied:

24.

Where, as in this case, the taxpayer has included information in his tax return but has left it to the Revenue to calculate the tax which he is due to pay, I think that the Revenue is entitled to treat as irrelevant to that calculation information and claims, which clearly do not as a matter of law affect the tax chargeable and payable in the relevant year of assessment. It is clear from sections 8(1) and 8(1AA) of TMA that the purpose of a tax return is to establish the amounts of income tax and capital gains tax chargeable for a year of assessment and the amount of income tax payable for that year. The Revenue's calculation of the tax due is made on behalf of the taxpayer and is treated as the taxpayer's self-assessment (section 9(3) and (3A) of TMA ).

25.

The tax return form contains other requests, such as information about student loan repayments (page TR2), the transfer of the unused part of a taxpayer's blind person's allowance (page TR3) or claims for losses in the following tax year (box 3 on page Ai3) which do not affect the income tax chargeable in the tax year which the return form addresses. The word “return” may have a wider meaning in other contexts within TMA . But, in my view, in the context of sections 8(1), 9, 9A and 42(11)(a) of the TMA , a “return” refers to the information in the tax return form which is submitted for “the purpose of establishing the amounts in which a person is chargeable to income tax and capital gains tax” for the relevant year of assessment and “the amount payable by him by way of income tax for that year” ( section 8(1) TMA ).

26.

In this case, the figures in box 14 on page CG1 and in box 3 on page Ai3 were supplemented by the explanations which Mr Cotter gave of his claim in the boxes requesting “any other information” and “additional information” in the tax return. Those explanations alerted the Revenue to the nature of the claim for relief. It concluded, correctly, that the claim under section 128 of ITA in respect of losses incurred in 2008/09 did not alter the tax chargeable or payable in relation to 2007/08. The Revenue was accordingly entitled and indeed obliged to use Schedule 1A of TMA as the vehicle for its enquiry into the claim (section 42(11)(a)).

96.

The FTT noted the effect of these paragraphs at [66] of the Decision setting out the further obiter comments of Lord Hodge in Cotter at [27]-[28] that if the taxpayer had calculated his liability to tax in the tax calculation summary as part of his self-assessment return then the claim would have been made in the return:

66.

In this passage, Lord Hodge appears to make a distinction between information included in the tax return form, which is relevant for the purpose of establishing the amount on which the taxpayer is liable to tax for the relevant tax year, and other information which does not affect the amount chargeable in that tax year. Lord Hodge then went on to comment, albeit obiter, on the position that would have been reached if the taxpayer had calculated his own liability (incorrectly) taking account of the loss rather than rely upon the HMRC calculation. He says this (at Cotter [27]-[28]):

27.

Matters would have been different if the taxpayer had calculated his liability to income and capital gains tax by requesting and completing the tax calculation summary pages of the tax return. In such circumstances the Revenue would have his assessment that, as a result of the claim, specific sums or no sums were due as the tax chargeable and payable for 2007/08. Such information and self-assessment would in my view fall within a “return” under section 9A of TMA as it would be the taxpayer's assessment of his liability in respect of the relevant tax year. The Revenue could not go behind the taxpayer's self-assessment without either amending the tax return (section 9ZB of TMA) or instituting an enquiry under section 9A of TMA.

28.

It follows that a taxpayer may be able to delay the payment of tax by claims which turn out to be unfounded if he completes the assessment by calculating the tax which he is due to pay. Accordingly, the Revenue's interpretation of the expression “return” may not save it from tax avoidance schemes. But what persuades me that the Revenue is right in its interpretation of “return” is that income tax is an annual tax and that disputes about matters which are not relevant to a taxpayer's liability in a particular year should not postpone the finality of that year's assessment.