Out of time rebate claims – Higgs v HMRC

A taxpayer wins case to claim a repayment exceeding the 4 year limit

Mr Higgs made payments on account for the tax year 2006/07 in accordance with the previous year’s liability. Mr Higgs forgot to sign and return his form to his accountant and therefore his 2006/07 Tax Return was not filed until 2 November 2011. When the 2006/07 Return was prepared his actual liability was significantly less than the payments on account, resulting in an overpayment of circa £27,000.

The legislation provides that an ‘overpayment relief’ claim can be made within 4 years from the end of the tax year. HMRC therefore argued that as the Tax Return had not been filed by 5 April 2011, no repayment was due, as the four year period had now expired.

Mr Higgs contended that the legislation does not apply to self assessments, only assessments made by HMRC. In addition he argued that even if it did apply to self-assessments, HMRC had discretion to extend the deadline and should be made to do so under the European Convention on Human Rights.

The tribunal agreed with Higgs and rejected HMRC’s position. Careful analysis of the legislation indicated that the four year time limit was intended to apply only to assessments made by HMRC.

Based on the outcome of this case, in certain circumstances taxpayers will have the right to file a self-assessment return many years after the end of the tax year concerned, and claim a repayment of any overpaid tax.This will not apply to taxpayers who have already submitted a Return and made an error.

However, for those individuals who have failed to submit a Tax Return, HMRC will now be forced to change their stance and repay any overpaid tax if a claim is made. It may also be possible, although less clear, for taxpayers who were not originally required to file a tax return for the year(s) in question to use the Higgs precedent.

It remains to be seen whether HMRC will accept the outcome in this case or seek to appeal the decision to the Court of Appeal. We suspect they will appeal of course…

If you think this may impact you, or you would like to discuss the decision in further detail please contact us.