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Procedure.Tax
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B7. Calculation of tax
Distinction between tax chargeable and tax payable
“It can be seen that both sections 8 and 9 draw a distinction between the amounts chargeable to income tax and capital gains tax and the amounts payable by way of income tax. And so under section 9(1), a self-assessment comprises two elements: (i) an assessment of the amounts chargeable to income tax and capital gains tax and (ii) an assessment of the amount payable by way of income tax. The amount payable reflects the aggregate amount of any income tax deducted at source which, as a result of section 8(5), includes income tax deducted or treated as paid on any income.” (HMRC v. Walker [2016] UKUT 32 (TCC), §15, Warren J and Judge Sinfield).
Self-assessment may show amount as repayable
“The tailpiece to subsection (1) envisages the possibility of a selfassessment showing an amount as repayable, but excludes certain items from that treatment. Deductions under the CIS are not within that exclusion; a self-assessment return can, therefore, show as repayable an excess of CIS deductions over the income tax which would otherwise be payable.” (HMRC v. Walker [2016] UKUT 32 (TCC), §16, Warren J and Judge Sinfield).
HMRC entitled to disregard irrelevant information/claims in calculating tax
“Where the taxpayer chooses to let the Revenue calculate the tax due but includes a claim for relief in a tax return form (whether from the outset or by amendment) which is clearly not relevant to the calculation of tax for the particular year of assessment, the Revenue may ignore the claim in its calculation of the tax under section 9(3) of TMA. It treats it as a claim made otherwise than in a return and Schedule 1A to TMA applies (section 42(11)(a) of TMA). In the procedure under that Schedule, if the Revenue considers that the claim contains obvious errors, it can amend the claim (paragraph 3). If satisfied that the claim is valid, the Revenue is to give effect to the claim promptly (paragraph 4). If not so satisfied, the Revenue may enquire into the claim and not give effect to it until the enquiry is completed (paragraphs 4(3) and 5).“ (HMRC v. Cotter [2013] UKSC 69, §35).
Losses may be carried forward even if not claimed in earlier return where no earlier return was required
“Paragraph 88 of Schedule 18 makes provision for “an amount stated in a company tax return for an accounting period which is required to be included in the return” and which affects or may affect the tax payable by the company for another accounting period. The amount in question is conclusively determined in relation to that other period once it can no longer be altered as part of the return in which it is required to be included. The basic provision specifying what is required in a return is that which is reasonably required by the notice under paragraph 3(1). As the actual returns for each of the periods in question indicated, this includes the amount of any trading losses incurred in the period…Its ‘voluntary’ return for the 2003 period either counts as a return (in which case the trading losses were included in it as HMRC required as part of their standard form for the period and the return is no longer capable of being altered) or it does not count as a return because it was not delivered pursuant to any notice requiring it to be delivered. In that latter case there has been no amount stated in a company tax return for the period that was required to be included in that return and there was nothing that could be conclusively determined as envisaged by paragraph 88 (as no longer capable of alteration in the manner envisaged by that paragraph).” (Bloomsbury Verlag GmbH v. HMRC [2015] UKFTT 660 (TC), §§134…136).
Conclusive effect of amounts stated in company tax returns
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"(1) This paragraph applies to an amount stated in a company tax return for an accounting period which is required to be included in the return and which affects or may affect—
(a) the tax payable by the company making the return for another accounting period, or
(b) the tax liability of another company for any accounting period.
(2) If such an amount can no longer be altered it is taken to be conclusively determined for the purposes of the Corporation Tax Acts in relation to that other period or other company.
Sub-paragraphs (3) to (5) explain what is meant by “can no longer be altered”." (FA 1998, Sch 18, para 88(1) - (2))
Amount that can no longer be altered
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"(3) An amount is regarded as one that can no longer be altered if—
(a) the period specified in paragraph 15(4) (general period for amendment by company) has ended,
(b) any enquiry into the return has been completed (or is completed so far as relating to the matters to which the amount relates by the issue of a partial closure notice),
(c) if an officer of Revenue and Customs amends the return under paragraph 34, the period within which an appeal may be brought against that amendment has ended, and
(d) if an appeal is brought, the appeal has been finally determined.
(4) If the return is amended by the company under a provision that allows an amendment after the end of the period specified in paragraph 15(4), an amount affected by the amendment ceases to be regarded as one that can no longer be altered until after whichever is the last of the following—
(a) the end of the period within which notice of enquiry into the return may be given in consequence of the amendment;
(b) if such a notice is given, the completion of the enquiry (or the completion of the enquiry so far as relating to the matters to which the amount relates by the issue of a partial closure notice);
(c) if an officer of Revenue and Customs amends the return under paragraph 34, the end of the period within which an appeal against that amendment may be brought;
(d) if an appeal is brought, the date on which the appeal is finally determined.
(5) If the return is amended by an officer of Revenue and Customs under paragraph 83(3) (consequential amendment of return where amount available by way of capital allowances is reduced), an amount affected by the amendment ceases to be regarded as one that can no longer be altered until after—
(a) the end of the period within which an appeal against that amendment may be brought, or
(b) if an appeal is brought, the date on which the appeal is finally determined." (FA 1998, Sch 18, para 88(3) - (5))
Required to be included in return
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"(6) For the purposes of this paragraph an amount carried forward from a period for which a return was made under section 11 of the Taxes Management Act 1970 is not regarded as one required to be included in a company tax return for a later period." (FA 1998, Sch 18, para 88(6))
No effect on power to make assessments
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"(7) Nothing in this paragraph affects any power to make an assessment other than a self-assessment or the power to make a discovery determination." (FA 1998, Sch 18, para 88(7))
No effect on right to claim relief for overpaid tax
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"(8) Nothing in this paragraph affects a power of the company making the return to make a claim under paragraph 51 (claim for relief for overpaid tax)." (FA 1998, Sch 18, para 88(8))
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No effect on corporate interest restriction
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"(9) Nothing in this paragraph affects the operation of any provision of Part 10 of TIOPA 2010 (corporate interest restriction)." (FA 1998, Sch 18, para 88(9))
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- Amount within the scope of an appeal can still be altered
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"[243] However, if an appeal is brought, an amount is not conclusively determined until the appeal has been finally determined. Paragraph 88(3)(d) does not refer to an appeal of an amendment to "the amount" and this is consistent with the interpretation of the jurisdiction we have set out above. The taxpayer appeals amendments made to its tax return, but the scope of the appeal is determined by the matter in question and more particularly the conclusions in a closure notice. Until the appeal is finally determined, amounts stated in the taxpayer's tax return are not conclusively determined, albeit that the only amounts which fall within the FTT's jurisdiction to amend are those which fall within the conclusions of the closure notice." (Gunfleet Sands Limited v. HMRC [2023] UKUT 260 (TCC), Judge Raghavan and Judge Bowler)
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