HMRC (generally) has 12 months7 to open an enquiry following the filing of a company’s self- assessment tax return – but when should time be counted from? In Dock and Let Ltd8, the FTT answered this important procedural point.
The facts of the case were not in dispute and can be stated shortly as follows:
- On 31 January 2012, the taxpayer filed its self-assessment tax return for its financial year ending 31 March 2011
- On 31 January 2013, HMRC delivered a notice (by hand) to enquire into the taxpayer’s return
- The taxpayer’s advisers wrote to HMRC to argue that HMRC was out of time to enquire into the return on the basis that the deadline for issuing the notice of enquiry had expired on 30 January 2013
- HMRC replied that the 12-month period started on the day after the return was filed, ie on 1 February 2012 and ended at midnight on 31 January 2013
- In July 2013, HMRC issued an information notice to the taxpayer in relation to its 2011 tax return, pursuant to paragraph 1, Schedule 36, Finance Act 2008
- In October 2013, the taxpayer’s advisers gave Notice of Appeal against the Schedule 36 notice on the basis that HMRC had opened its enquiry out of time
The relevant provision which fell to be considered by the FTT was paragraph 24(2), Schedule 18, Finance Act 2008, which provides as follows:
“If the return was delivered on or before the filing date, notice of enquiry may be given at any time up to twelve months from the day on which the return was delivered.”
HMRC’s principal argument was that when a statutory provision refers to the word “from”, followed by a reference to a specified date, calculation of the time limit does not include the day itself. Accordingly, when calculating the twelve month enquiry period referred to in paragraph 24(2), the day on which the return in question was delivered to HMRC is excluded.
The taxpayer argued that there was no set rule, and that much depended on the context. In a taxation case, the relevant context included factors such as the presumption against “doubtful penalisation” and that a subject should only be taxed “on clear words”. The taxpayer argued that when calculating the twelve month period referred to in paragraph 24(2), the day on which the return was delivered should be included, and so HMRC had opened its enquiry out of time.
Judge John Clark preferred HMRC’s argument and dismissed the appeal. He was not persuaded that there was sufficient reason to depart from the general rule of interpretation found in cases such as South Staffordshire Tramways Co v Sickness and Accident Assurance Association9 and Zoan v Rouamba10.
Given the large number of enquiry notices which HMRC issues, it is perhaps surprising that the FTT had not been asked to consider this important question previously.
This case provides welcome confirmation of the date from which the 12-month time period in which HMRC may open an enquiry into a return is to be calculated.
To read the decision click here.