As readers will be aware, HMRC generally has twelve months from the date a company files a return to open an enquiry. In Dock and Let Ltd v Revenue and Customs Commissioners, the First-tier Tribunal (Tax Chamber) ('FTT') had to consider the question of whether that twelve-month period includes the day of filing.
The facts of the case were not in dispute and can be stated shortly as follows:
- On 31 January 2012, Dock and Let Limited (the 'Appellant') 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 Appellant's tax return.
- The Appellant'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 twelve-month period started on the day after the return was filed, i.e. 1 February 2012, and ended at midnight on 31 January 2013.
- In July 2013, HMRC issued an information notice to the Appellant in relation to its 2011 tax return, pursuant to paragraph 1, Schedule 36, Finance Act 2008 (the 'Schedule 36 notice').
- In October 2013, the Appellant'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), you do not include the day on which the return in question was delivered to HMRC.
The Appellant 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 Appellant 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. Accordingly, in the instant case, 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 Association and Zoan v Rouamba.
Given the large number of enquiry notices which HMRC issue, 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 twelve-month time period in which HMRC may open an enquiry into a return is to be calculated.