First-tier Tribunal (Tax)

[2010] UKFTT 515 (TC)

TC00770

Appeal number: TC/2009/15610

Appeal against closure notice and amendment to self assessment

FIRST-TIER TRIBUNAL

TAX

MR. MARK CASSIN Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL: Miss J. Blewitt (TRIBUNAL JUDGE) Miss C. A. Roberts (MEMBER)

Sitting in public at Manchester Civil Justice Centre on 8 October 2010

Mr. Mark Cassin, Appellant

Mr. Tim Fieldsend, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.       This is an appeal by the Appellant, Mr. Cassin against the Closure Notice and amendment to his Self Assessment by HMRC for the year ended 5 April 2007. On 1 October 2007 the Appellant’s self assessment was processed and overpaid income tax repaid to the Appellant in the sum of £3,836 on 17 October 2007 HMRC opened an enquiry into the Appellant’s Tax Return within the statutory time limit. A Closure Notice was issued to the Appellant on 17 March 2009 which concluded that the Appellant’s Tax Return for the year ended 5 April 2007 had increased income tax liability of £2731.20. The amendment to the Self Assessment comprised £1,104.80 tax overpaid with £2678.85 outstanding.

2.       The issues for this Tribunal to determine are whether the exclusion of travel and subsistence deductions (including loan interest on the Appellant’s vehicle) should be restricted to mileage allowance relief for the years 2006-2007 only, whether the Appellant’s inclusion of expenses for the years 2001-2002 and 2002-2003 should be disallowed in the 2006-2007 claim and whether HMRC should accept an error or mistake claim out of time.

3.       The Appellant appealed by way of Notice of Appeal dated 3 November 2009. The grounds of appeal state that the inclusion of deductable costs was made in good faith and that HMRC did not dispute that the Appellant has overpaid income tax in previous periods. The Appellant also states that HMRC have not disputed that the timeframe in which the claims were made for the years 2001-2002 and 2002-2003 would have been allowed but for the enquiry. The Appellant states that it is unreasonable and unjust for HMRC to disallow the claims because of his failure to tick the correct box on his Tax Return bearing in mind that by the time that the enquiry was concluded the appellant was approximately 30 days outside the statutory time limit to claim retrospectively.

4.       The Tribunal also had the benefit of correspondence from the Appellant to the Tribunal dated 10 March 2009, 5 June 2009, 1 July 2009, 28 September 2009, 3 November 2009 and 23 March 2010, together with the documentation provided by the Appellant in support of his claims.

5.       In oral evidence to the Tribunal the Appellant clearly and concisely reiterated the basis of his appeal as set out in the correspondence and Notice of Appeal referred. The Appellant told the Tribunal that he did not dispute the legislation or case law relied upon by HMRC. The Appellant stated that he did not receive the letter from HMRC dated 17 October 2008 (contained within the bundle) which requested further information in support of the claims. The Appellant stated that when he received the formal notice for documents from HMRC dated 28 January 2009 he responded by providing all information requested, however at this point the statutory time limit for making retrospective claims had almost expired. The Appellant accepted that he had not followed the correct procedure, stating that at the time the expenses arose he had a young child and was working long hours and including such expenses on the Tax Return had not been his priority. No reason was given by the Appellant as to why the claims were not included in subsequent returns until 5 April 2007.

6.       HMRC contend that Section 359 (3) Income and Corporation Taxes Act (“ICTA”) 1988 and Section 36 (1) (a) Capital Allowances Act 2001 are applicable, by virtue of which loan interest on a vehicle belonging to an employee, even where a vehicle is a requirement of the employment, is not allowable.  Furthermore HMRC submit that Sections 229 and 327 Income Tax (Earnings and Pension) Act (“ITEPA”) 2003 apply by the introduction of mileage allowance payments from 6 April 2003 and that expenses are only due as against the year to which they relate. HMRC argue that in applying the relevant legislation the only allowable expenses for the period 2006-2007, on the basis of figures provided by the Appellant, is Mileage Allowance Relief in the sum of £2,147.

7.       The Tribunal, finding there being no dispute by the Appellant as to the figures calculated by HMRC, found that HMRC had applied the correct legislation and allowed the correct amount for Mileage Allowance Relief for the expenditure incurred for the period 2006-2007, there being no other allowable expenses.

8.       As regards the expenses for the years 2001-2002 and 2002-2003, the Tribunal found that the time limits for the Appellant to have made a claim were 31 January 2008 and 31 January 2009 respectively, as prescribed by Sections 42, 43 and 33 Taxes Management Act (“TMA”) 1970. The Appellant is therefore out of time to claim expenses for the periods 2001-2002 and 2002-2003.

9.       The only issue for the Tribunal is whether a claim should be allowed under the Error or Mistake Provisions of Section 33 TMA 1970:

33(1) “If a person who has paid income tax or capital gains tax under an assessment (whether a self-assessment or otherwise) alleges that the assessment was excessive by reason of some error or mistake in a return, he may by notice in writing at any time not later than five years after the 31^st January next following the year of assessment to which the return relates, make a claim to the Board for relief.”

The expenses claimed by the Appellant of £8,975 included Mileage Allowance Relief (which was allowed for the period 2006-2007) and also loan interest from 2001 onwards for the Appellant’s vehicle. The Appellant was advised by his employers, British Vita Plc that loan interest was an allowable deductible against income tax. The Tribunal accepts that the Appellant may have overlooked making a claim for the interest at the time; however no explanation was given as to why the claim for loan interest had not been made in previous tax returns. The Tribunal also found that it was the responsibility of the Appellant to ensure he was aware of what could be claimed, and should not have relied exclusively on advice from an employer. The 2006-2007 Tax Return does not give notice in writing of a claim as a result of excessive earlier assessments. The Tribunal noted the Appellant’s contention that it was simply omission on his part, however it was noted that HMRC were wholly unaware that the 2006-2007 Tax Return contained any retrospective claims until the Appellant provided the information requested in the formal notice issued by HMRC on 28 January 2009. In those circumstances, the Tribunal having found there is no notice in writing nor proceedings arising from any claim, the Tribunal could not allow such a claim.

10.    The appeal is dismissed and amendment confirmed.

11.    This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

TRIBUNAL JUDGE

RELEASE DATE: 27 October 2010