Out of time tax returns – could you have a second chance?
A Tribunal decision cast doubt on HMRC’s refusal to process tax returns which are sent in more than four years after the end of the relevant tax year.
The Taxpayer’s case
The case concerned a taxpayer (Mr Higgs) who had made large payments on account for the tax year 2006/07. For various reasons he did not file his tax return for 2006-7 until November 2011. The return showed a tax liability that was much lower than the payments on account, so the taxpayer was due a substantial refund.
HMRC refused to process the return, and make the repayment of tax, on the grounds that the taxpayer had only four years from the end of the tax year 2006/07 in which to submit a return. The return should therefore have been submitted by 5 April 2011 at the latest.
What the Tribunal decided
The Tribunal decided that the four year rule did not apply in the taxpayer’s case and ordered HMRC to process the return.
Full details of the case can be downloaded from the HM Courts and Tribunals Service website at: http://www.tribunals.gov.uk/financeandtax/Documents/decisions/Higgs-v-HMRC.pdf
What might HMRC do next?
All cases will need to be considered on their own merits, and HMRC has not yet made a policy statement on the impact of Mr Higgs case on other taxpayers. But it is understood by TaxAid that HMRC may decide to apply the Higgs decision only to late returns submitted on or after the date of the hearing (11 March 2015).
HMRC may make an appeal against the Upper Tribunal decision, or it may ask Parliament to change the law.
How the decision might apply to other taxpayers
Here are some general guidelines on how the case could impact you:
- The decision will not affect you where HMRC has made an estimate (determination) of your tax liability. Where HMRC has estimated your liability, you have three years from the normal filing date in which to submit a return. Eg If HMRC estimated your tax bill for 2010/11, you would need to have filed a return by 31 January 2015.
- The decision does not change the time limits for correcting errors on returns which have been filed. You have four years from the end of the tax year in which to claim ‘overpayment relief’ if there is an error on your return which means you overpaid tax.
- The decision may affect you if you submitted a return late, and
- HMRC refused to process the return because it was received more than four years after the end of the relevant tax year (so after 5 April 2015 for returns due for 2010/11), and
- The return showed an overpayment of tax
Note: Mr Higgs’ case concerned overpayment of tax due to payment on account, but it may also apply to tax deducted at source – eg through CIS or PAYE.
What you should do
Consider writing to HMRC as soon as possible, asking for the return to be processed.
If your income is within TaxAid’s remit (less than £20,000 per annum) please contact TaxAid’s helpline for further advice.