Tribunal rules HMRC's enquiry invalid

15 April 2016

In Revell v HMRC [2016] UKFTT 97, the First-tier Tribunal (FTT) held that a purported enquiry by HMRC into an unsolicited tax return was invalid and allowed the taxpayer's appeal.


Following a reconciliation of the taxpayer's PAYE records from various employers, HMRC formed the view that there had been an underpayment of tax. HMRC sent a request to deliver a return for 2008/09 to what it believed to be the taxpayer's last known address.  However, HMRC sent the request to the wrong address, despite having received the updated address for the taxpayer in form P60. Not surprisingly, the taxpayer did not receive the request and did not complete a return for 2008/09. HMRC therefore issued a determination of tax due pursuant to section 28C Taxes Management Act 1970 ("TMA") (determination of tax where no return delivered).

The taxpayer proceeded to complete a self-assessment return for 2008/09 voluntarily (the return). This had the effect of applying a notional credit resulting in no tax being shown as due for that year.

HMRC commenced an enquiry into the return and on conclusion of its enquiry issued a closure notice to the taxpayer informing him that it had concluded that the tax credit should be removed and therefore further tax was due from him.

The taxpayer appealed the conclusions contained in the closure notice. 

The FTT's decision

Before the FTT, the taxpayer argued that HMRC had not validly opened an enquiry as no valid request to file a return had been made by HMRC (section 8 TMA).

The FTT considered whether the taxpayer was required by a notice given to him by HMRC to make and deliver a return for 2008/2009. The FTT concluded that the notice had not been properly served in accordance with section 115 TMA, as at the time the request was made the address to which it was sent was no longer the last known place of residence of the taxpayer. The presumption of service in section 7 Interpretation Act 1978 could not apply.

HMRC informed the FTT that it receives approximately 350,000 unsolicited returns a year and that it treats such returns as if they had been submitted in response to a notice under section 8 TMA to make a return. Accordingly, it contended that the return should be treated as if it had been submitted in response to a section 8 notice.

This submission was rejected.  The FTT was of the opinion that there was no basis for the submission that by making an unsolicited return the taxpayer had waived the requirement for a notice to file under section 8 TMA. If Parliament had intended such a result, it would have so provided in the legislation. In the FTT's view, the return should be characterised as a notice of liability to income tax under section 7 TMA, rather than a self-assessment return.

As HMRC had failed validly to serve a request for a return pursuant to section 8 TMA, it was unable to issue a determination notice, open an enquiry, or issue a closure notice (under sections 28C, 9A and 28A TMA, respectively).

The taxpayer's appeal was therefore allowed. 


The effect of this decision is that HMRC must issue a notice to file under section 8 TMA in order to preserve its ability to open an enquiry under section 9A TMA. Without such a request, it will not be able to open an enquiry into an unsolicited return submitted by a taxpayer, although it may seek to issue a discovery assessment under section 29 TMA (provided it is in time to do so). Other taxpayers who have filed unsolicited returns should review their position as soon as possible as they may be able to challenge the validity of HMRC's enquiries into those returns.

Given that HMRC receives approximately 350,000 unsolicited returns a year, this decision could place a huge administrative burden on HMRC which may influence its decision whether to appeal to the Upper Tribunal.

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