Webster, Re

A tax return cannot be rectified in equity to circumvent a statutory regime governing tax assessments, amendments and appeals. Even if an electronic document may in principle be capable of rectification, the court must consider its underlying nature and any statutory requirements governing it. Where Parliament has provided a statutory route for challenging HMRC’s decision, proceedings in the High Court seeking the same practical result are an abuse of process. A careless failure to check and correct a tax return, despite signing a declaration that it was correct and complete, will also weigh decisively against discretionary rectification.

The claimant sought rectification of his electronically submitted tax return for 2016/2017. He had intended to claim Gift Aid carry-back relief for an £800,000 donation made in 2017/2018, but entered £400,000 in the relevant box and later submitted an amended return showing £800,000. HMRC treated the statutory election as invalid and issued closure notices imposing additional tax, penalties and interest.

HMRC did not participate in the proceedings. The issues were whether the tax return was capable of rectification as a unilateral or electronic instrument, whether the statutory tax regime excluded equitable relief, whether the High Court was the appropriate forum, and whether rectification should be granted as a matter of discretion.

1. Claim dismissed. The claimant’s intended figure and the nature of his error were sufficiently clear. However, his failure to update and check the return amounted to carelessness. He had signed a declaration under Taxes Management Act 1970 s 8 that the return was correct and complete. That conduct did not justify the court’s equitable sympathy or discretion.
2. A unilateral instrument may in principle be capable of rectification. The court accepted the general proposition in Snell’s Equity, but considered a tax return submitted pursuant to statutory requirements qualitatively different from the instruments ordinarily considered in that context. The court was not satisfied that a tax return was a unilateral instrument capable of rectification, or that it was the appropriate instrument for correction.
3. An electronic document may in principle be susceptible to rectification. The relevant question is the underlying nature of the document, subject to statutory or other requirements as to form or execution. That conclusion did not establish that this tax return could be rectified.
4. The Gift Aid provisions formed part of a clear statutory regime. Section 426 of the Income Tax Act 2007 governed the carry-back election, while the statutory machinery governing enquiries, amendments, closure notices and appeals provided the appropriate route for resolving the dispute. Cameron v HMRC [2010] UKFTT 104 (TC) illustrated that a carry-back election had to be made in the original return.
5. Following Knibbs and ors v HMRC [2018] EWHC 136 (Ch), Knibbs and ors v HMRC [2019] EWCA Civ 1719 and Autologic Holdings plc v Inland Revenue Commissioners [2005] UKHL 54, tax disputes assigned by Parliament to a specialist statutory tribunal must be pursued through that statutory route. High Court proceedings seeking, in substance, to negative or alter the tax liability are an abuse of process.
6. The observations in Marley v Rawlings [2014] UKSC 2 did not assist the claimant when read in context. Even if rectification were theoretically available, the court would refuse it on the facts and would not permit equity to circumvent the statutory code.