Rupert Grint v The Commissioners for HMRC

For the 18-month test in section 217(3) of the Income Tax (Trading and Other Income) Act 2005, the relevant period is that for which the accounts of the business are drawn up. Where more than one set of accounts ends on the new accounting date, the tribunal must identify the accounts properly described as the business's accounts. It is not enough that another set was prepared for tax purposes or could produce a tax advantage.

Self-employment supplementary tax-return pages are not accounts merely because they contain figures commonly found in accounts. Accounts relied on for the test must exist when the taxpayer files the return notifying the accounting-date change; accounts prepared later cannot retrospectively satisfy the test.

Rupert Grint v The Commissioners for HMRC appealed from the First-tier Tribunal decision, [2016] UKFTT 0537 (TC), which upheld closure-notice amendments to his 2009/10 and 2010/11 income-tax returns.

Mr Grint sought to change his accounting date from 31 July to 5 April 2010. He contended that this produced a basis period of about 20 months, bringing profits into the earlier tax year. The issue was whether he satisfied the 18-month test in section 217(3) of the Income Tax (Trading and Other Income) Act 2005.

Several documents ended on the new date: long accounts for 20 months, time-apportioned schedule accounts for eight months, tax-return supplementary pages, and later accruals-based accounts. The central questions were which documents were the relevant accounts and whether accounts prepared after the return could be relied upon.

1. Appeal dismissed. The First-tier Tribunal made no error of law in holding that the 18-month test was not met.
2. Section 989 of the Income Tax Act 2007, read with section 217(3) of the Income Tax (Trading and Other Income) Act 2005, required identification of the accounts of the business. The statutory language contemplated one relevant period of account. Where competing accounts ended on the new accounting date, the tribunal had to decide which were properly the business's accounts.
3. The Long Accounts were the relevant accounts. They were signed by Mr Grint, recorded his financial performance over the 20-month period, stated the accounting policies used, and were used by his accountants to report that performance to him. The Schedule Accounts were time-apportioned figures derived from the Long Accounts and did not reflect performance over their respective periods. Their potential importance for tax purposes did not make them the business's accounts. The Tribunal applied the reasoning in Jenkins Productions Ltd, 29 TC 142 (1944), concerning the more important accounts of a business.
4. The self-employment supplementary pages were not accounts. Although they related to Mr Grint and purported to summarise transactions over stated periods, they were intended to return tax liability, not to serve as records of transactions. The later New Accounts could not be used because accounts capable of establishing the relevant period of account had to exist when the taxpayer filed the return notifying the change. Otherwise the statutory test could be satisfied retrospectively after an enquiry began.
5. The relevant Long Accounts covered more than 18 months. The condition in section 217 was therefore not met, section 216(3) did not alter the basis period as claimed, and the appeal was dismissed.

• Upper Tribunal (Tax and Chancery Chamber): dismissed Mr Grint’s appeal and upheld the First-tier Tribunal’s conclusion that the 18-month test in section 217(3) of the Income Tax (Trading and Other Income) Act 2005 was not met.
• First-tier Tribunal: dismissed the appeal against the closure-notice amendments: [2016] UKFTT 0537 (TC).