FTT cannot rule on self assessment refusal

The First Tier Tribunal (FTT) has determined that it has no jurisdiction on whether HMRC accepts or rejects self assessment tax returns in the case of a shop owner who failed to file his returns for 16 years running and was then subject to a bankruptcy petition

In J Huntley v HMRC [2018] UKFTT 760 the FTT heard the case of business owner John Huntley who failed to submit a number of tax returns. Huntley was the proprietor of a shop from around 1996-7, but he did not file tax returns for the period of 1996-7 to 2011-12.

During this period HMRC sent Huntley blank tax returns to complete, which he failed to do so and did not pay any tax. In 2012, HMRC ‘caught up with the situation’ and having written to Huntley on a number of occasions with requests for further information, issued him with a discovery assessment in September 2013.

Huntley lodged an appeal the following week which was unsuccessful. In November, he was assessed for penalties resulting from the assessment and failed to make an appeal in time. However, the following year HMRC offered him a review of the assessments, which he accepted, and also lodged a late appeal against the penalties.

This was included in the review, and HMRC reached the decision to discharge most of the penalty assessments and uphold those for the years 2005-6 to 2008-9, reduced to 75%.

Huntley took no action, with HMRC proceeding to initiate a bankruptcy petition to the value of £154,000. This petition was stayed pending the decision of the FTT.

On 26 July 2016, Huntley provided HMRC with four tax returns for the years 2008-9 to 2011-12. On 15 November 2016, he lodged a further 12 tax returns with HMRC for the years 1996-7 to 2007-8.

According to the FTT, ‘In effect, by these two lodgements, Huntley filed 16 tax returns for all the years for which HMRC had raised discovery assessments against him. His returns showed significantly less tax to be owing than HMRC had assessed’. HMRC decided not to accept the returns.

Huntley lodged an application with the FTT to be allowed to make a late appeal against this refusal, and the FTT accepted. HMRC then applied for the proceedings to be struck out ‘on the basis that the tribunal had no jurisdiction’.

The FTT decided on 20 December 2018 that the filing of self-assessment returns cannot displace discovery assessments, remarking that as determinations can be displaced by a tax return but cannot be appealed, and assessments can be appealed but cannot be displaced by a tax return, therefore the assessments stood, noting that the legislation ‘does not give two bites at the cherry’.

It also ruled that neither party was able to point to a provision that showed that the FTT had jurisdiction ‘over HMRC’s refusal to accept and process tax returns’. Judge Barbara Mosedale stated that the normal provision conferring jurisdiction over individual tax returns is s31 of the Taxes Management Act 1970 (TMA 1970), but that provision ‘does not confer any jurisdiction over a refusal by HMRC to accept or process tax returns.

‘On the contrary, it gives jurisdiction over assessments made by HMRC, and over amendments of tax returns made by HMRC’.

The case, the FTT concluded, was redundant as the 16 tax returns provided by Huntley could not displace the assessments, which were ‘valid and now beyond challenge, an appeal against them having been unsuccessful’.

J Huntley v HMRC [2018] UKFTT 760 is here

Report by James Bunney

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