Rajab Zafari, R (on the application of) v The Commissioners for HMRC

A legitimate expectation requires a representation by a public body that is clear, unambiguous and devoid of relevant qualification. A communication staying enforcement action to allow amended tax returns to be prepared does not necessarily represent that the returns will be accepted. The representation must also be made by a person with actual or ostensible authority to make it.

A taxpayer has no right to amend a return after the statutory period in Taxes Management Act 1970, section 9 ZA. Nevertheless, the Commissioners possess a discretionary power under Commissioners for Revenue and Customs Act 2005, section 5 to accept late returns. That discretion must be exercised with regard to the statutory purpose and the importance of hard-edged fiscal time limits.

The claimant discovered that earlier self-assessment returns had overstated his taxable income because property expenses had been omitted. He submitted amended returns outside the 12-month period in section 9 ZA of the Taxes Management Act 1970.

HMRC refused to accept them. The claimant sought judicial review, contending that a letter from a Debt Enforcement Officer had created a legitimate expectation that the amended returns would be accepted. The issues were whether the correspondence constituted a sufficiently clear representation, whether the author had relevant authority, and whether HMRC had power to accept late amended returns.

1. The claim was dismissed. The letter of 30 September 2022 was not a clear representation that the amended returns would be accepted. Read in context, it stated that recovery action would be held temporarily while the returns were amended and directed the matter to the Self-Assessment team. It did not state that the returns would be accepted or that any discretion had been exercised.
2. The separation between HMRC departments was significant. The author was a Debt Enforcement Officer concerned with recovery, whereas the proposed amendments concerned the calculation of tax. The letter therefore could not fairly be understood as an undertaking by the department responsible for deciding whether amendments could be accepted.
3. A representation capable of creating a legitimate expectation must be made by a person with actual or ostensible authority to make that particular representation. The broader proposition that general authority to speak for a public body is sufficient was not accepted. The question of the officer’s authority did not arise once the correspondence had been properly interpreted.
4. The claimant had no statutory right to amend the returns after the period in section 9 ZA. However, HMRC did possess a discretionary power under section 5(1)(a) of the Commissioners for Revenue and Customs Act 2005 to accept late amended returns. That power derived from the Commissioners’ general responsibility for the collection and management of revenue and was not incompatible with the taxpayer’s lack of an entitlement to file out of time.
5. The existence of the discretion was distinct from its exercise. HMRC had to take account of the statutory scheme and the importance of hard-edged time limits when deciding whether to accept a late return. The authorities concerning taxpayer rights and statutory finality did not establish that HMRC lacked the separate discretion to accept late returns.
6. The defendants were entitled to advance the power argument despite not raising it in their summary grounds. Alternatively, any admission was withdrawn because the issue was a pure point of law and withdrawal caused no prejudice. That alternative conclusion did not affect the result, because the legitimate-expectation ground failed on the interpretation of the correspondence.