HM Revenue & Customs v Cotter

In a self-assessment regime, a matter is contained in a return only when it is actually included and reasonably included in response to the prescribed form. If HMRC challenges it, the Revenue must use the return-enquiry or correction procedure under the Taxes Management Act 1970. This remains so where substantive tax law may make the claimed relief unavailable for that year. The substantive dispute belongs to the First-tier Tribunal on appeal, and collection proceedings cannot bypass that statutory route.

The appellant amended his 2007/08 self-assessment return to claim income loss relief for a loss incurred in 2008/09. The Revenue treated the claim as a standalone claim under the relevant provisions of the Taxes Management Act 1970 and began collection proceedings. The High Court, David Richards J, held that the court could decide whether the claim could be included in the return and gave judgment against the appellant: [2011] EWHC 896 (Ch). The appeal concerned whether the claim was contained in the return for the purposes of the return-enquiry procedure, and whether the court or the First-tier Tribunal had jurisdiction, without determining the substantive entitlement to relief.

The appeal was allowed.

1. Meaning of contained in. Section 9A(4) of the Taxes Management Act 1970 deliberately distinguishes information contained in a return from information required to be contained in it. The former means information actually included and reasonably included in response to the particulars sought by the prescribed return form. The return must be read with any relevant explanatory notes.
2. Application to the return. The relevant boxes permitted the appellant to state a loss relief claim and identify the year against which relief was sought. The Revenue did not contend that the form prohibited completion of the boxes. Its construction would impose an intolerable burden on taxpayers, produce satellite litigation and undermine the self-assessment regime’s objective of simplicity and early finality, identified in Langham v Veltema [2004] STC 544. It was also inconsistent with the references in sections 9(1) and 9(3) to information contained in the return.
3. Procedural consequence. If the Revenue challenged the claim, it had to use the section 9A procedure or, where applicable, the correction power in section 9ZB. That remained so even if the claim was substantively unavailable against liability for the relevant year. The taxpayer therefore had a right of appeal to the First-tier Tribunal under section 31, to the exclusion of the County Court and High Court, consistently with Autologic Holdings v IRC [2006] 1 AC 118. The Revenue could open enquiries under both regimes protectively if uncertain which applied.
4. Substantive issue left open. The court did not decide whether relief could be claimed in the 2007/08 return for a loss incurred in 2008/09. That issue, involving section 128(7) of the Income Tax Act 2007, section 42 and Schedule 1B of the Taxes Management Act 1970, was for the First-tier Tribunal. The County Court and High Court had no jurisdiction to determine it.

• Court of Appeal (Civil Division). The appeal from the High Court was allowed: [2012] EWCA Civ 81.
• High Court of Justice (Chancery Division). David Richards J gave judgment against the appellant on the jurisdiction issue in the collection proceedings: [2011] EWHC 896 (Ch).