HM Customs and Revenue v Raftopoulou

A formal enquiry into a repayment claim under Schedule 1A to the Taxes Management Act 1970 begins only when HMRC gives written notice of its intention to enquire. Whether a communication gives that notice is a question of law, assessed from the perspective of a reasonable recipient in the relevant context. A rejection based only on the claim’s date and the statutory time limit is not an enquiry and does not constitute a closure notice. Section 118(2) does not generally extend time for a voluntary claim. Its second limb concerns mandatory acts and relieves the consequences of non-compliance where there is a reasonable excuse; it does not deem a late repayment claim to have been made in time. Such a rejection is therefore not appealable to the First-tier Tribunal under paragraph 9 of Schedule 1A.

The taxpayer paid income tax for 2006–07 and later claimed repayment under Schedule 1AB to the Taxes Management Act 1970. HMRC rejected the claim as outside the four-year period. The First-tier Tribunal struck out her appeal for want of jurisdiction.

The Upper Tribunal allowed the taxpayer’s appeal. It held that HMRC’s rejection letter could constitute both an enquiry notice and a closure notice under Schedule 1A, and that section 118(2) could excuse the late claim. It remitted the matter to the First-tier Tribunal to consider reasonable excuse. HMRC appealed. The central questions were whether the letter created an appealable closure notice and whether section 118(2) extended the time for making the repayment claim.

1. Appeal allowed. The Upper Tribunal’s order was set aside and the First-tier Tribunal’s order striking out the taxpayer’s appeal was reinstated.
2. Schedule 1A to the Taxes Management Act 1970 establishes a formal process. Under paragraph 5, an enquiry begins only when an HMRC officer gives written notice of an intention to enquire into the claim. The communication must be understood by a reasonable recipient in the taxpayer’s position as giving that notice. Whether it does so is a question of law.
3. HMRC’s letter did no more than reject the claim by reference to its date and the expiry of the four-year period in paragraph 3(1) of Schedule 1AB. It did not state an intention to enquire, state that enquiries had been completed, state conclusions from an enquiry, or amend the claim. It was therefore neither an enquiry notice nor a closure notice. No appeal lay to the First-tier Tribunal under paragraph 9 of Schedule 1A.
4. The formal enquiry process must be distinguished from preliminary consideration or informal scrutiny. The court applied the approach in Portland Gas Storage Ltd v Revenue and Customs Commissioners [2014] UKUT 270 (TCC) and the distinction explained in Langham (Inspector of Taxes) v Veltema [2004] EWCA Civ 193.
5. Section 118(2) did not extend the four-year period for a repayment claim. “Anything required to be done” ordinarily referred to mandatory acts, not conditions attached to the voluntary exercise of a right. The second limb relieved the consequences of non-compliance where its conditions were met; it did not deem the act to have been performed or confer the benefit of a timely claim. The statutory scheme’s specific extension provisions and its balance between finality and fairness reinforced that construction.
6. The court declined to decide whether the Upper Tribunal could order payment in respect of pro bono representation, because the issue had no practical effect after the appeal was allowed.

• Court of Appeal (Civil Division): allowed HMRC’s appeal, set aside the Upper Tribunal’s order and reinstated the First-tier Tribunal’s order striking out the appeal.
• Upper Tribunal (Tax and Chancery Chamber): allowed the taxpayer’s appeal and remitted the matter to the First-tier Tribunal to determine whether she had a reasonable excuse for claiming out of time.
• First-tier Tribunal: struck out the taxpayer’s appeal because it lacked jurisdiction to consider HMRC’s rejection of the repayment claim.