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

3…The second [question] relates to the effect of the inclusion of such a claim (even if erroneous) within Mr Derry’s return for the previous year, in circumstances where the Revenue have failed to institute a timeous enquiry into the return under Taxes Management Act 1970 as amended (“TMA”) section 9A (“the tax return issue”)…The second raises issues as to the correct understanding and effect of Mr Derry’s return, in the light of the law and practice relating to the self-assessment regime, having regard in particular to the guidance given by this court in Revenue and Customs Comrs v Cotter [2013] UKSC 69; [2013] 1 WLR 3514 (“Cotter”).

I am not satisfied that these issues have been fully explored in argument before us, which has concentrated on the entitlement to relief rather than the means of enforcement. As has been seen, there remain unresolved uncertainties as to the correct interpretation of the entries in the on-line form and their treatment by the Revenue. In addition, we heard little discussion of the relationship of the enquiries respectively under section 9A and Schedule 1A paragraph 5. Apart from timing, I did not understand it to be suggested that there was any material difference between the processes. While it may be prudent for the Revenue to institute an enquiry under the former section, if there is any doubt about what is properly to be treated as part of the return, it does not necessarily follow that the Revenue is thereafter bound by the contents of the return for all purposes. If it later emerges that a claim was wrongly included in the return for that year (for example, because it should have been treated as subject to TMA Schedule 1B), it may at least be arguable that the Revenue should not be precluded at that later stage from opening an enquiry on the correct basis.

These are potentially important issues. Since we do not have to decide them in the context of the present case, I would prefer to leave them open for further consideration in an appropriate case with the benefit of full examination of the relevant law and practice.

The Court of Appeal reached the conclusion that the claim made by Mr Derry was relevant to the calculation of the tax due (see para 47 above) but they took no account of Mr Dean’s evidence. However, if that evidence is accepted, it would seem to me provisionally to follow that that their conclusion was wrong and that the effect described by Lord Hodge in para 27 of Cotter (para 51 above) would apply only in this case to a paper return in which the taxpayer performed his calculation of tax due taking the claim into account. It follows that the Court of Appeal would be in error in applying Lord Hodge’s reasoning to an online return (see per Henderson LJ cited at para 52 above).

If that is correct, then as I see it (as I have said) provisionally, unless the ratio in Cotter is to be in some way qualified for online tax return forms (which is not suggested), the relief claimed through Box 15 would not form part of the statutory “return” even if the true interpretation of Box 15 is that it is permitting an adjustment to the tax. I do not consider that a taxpayer would necessarily have been misled by this since he would see that his entry had no effect on the figure in Box 1. On that basis, HMRC would not have to open an enquiry into the return where the taxpayer had filled in Box 15 with an erroneous claim as opposed to an enquiry into the claim. I would provisionally so hold for the reasons that I have given.

[Emphasis Added]