Upper Tribunal confirms First-tier Tribunal has jurisdiction to amend tax return

02 May 2017

In HMRC v Eric Walker [2016] UKUT 32, the Upper Tribunal (UT) has confirmed that the First-tier Tribunal (FTT) has the power, under section 50, Taxes Management Act 1970 (TMA), to amend a return if it decides the taxpayer is entitled to a smaller repayment than the one claimed.


In the tax year 2011/12, Mr Walker (the taxpayer) was engaged as a sub-contractor in the construction industry. His tax return for that year showed a repayment due to him of £6,040. He claimed to have been paid net under the rules of the Construction Industry Scheme. Included in his tax calculation was £6,627.25 of tax which he claimed had been deducted by three contractors when making payments to him.

Under its policy of "process now, check later", HMRC gave effect to the return and paid the taxpayer £6,040. 

HMRC opened an enquiry into the return on 14 March 2013 and subsequently issued a closure notice under section 28A, TMA, amending the return to, amongst other things, reduce the amount claimed for overpaid tax from £6,040 to £821.07. The taxpayer's Self-Assessment Statement was also updated to reflect this change, which recorded that the taxpayer was due to pay HMRC £3,983.39.

The taxpayer appealed against the closure notice.  

The FTT found in favour of the taxpayer and allowed his appeal. The FTT concluded that the taxpayer was entitled to treat as deducted the full amount which he had entered on his tax return. However, because of amendments to the amount of deductible expenses agreed between the taxpayer and HMRC, the FTT concluded that the taxpayer was entitled to a smaller repayment than the one actually made to him but that amount was larger than the amount of repayment shown as due on his amended self-assessment. 

The FTT calculated that the taxpayer was entitled to a repayment of £3,781, under section 59B, TMA. The taxpayer had therefore been overpaid £2,259 (being the difference between £6,040 and £3,781).

Notwithstanding these findings of fact, the FTT concluded that it had no power to further amend the return in order to reflect what, on its findings, were the correct figures, because the amendments previously made by HMRC had not resulted in the taxpayer being either overcharged or undercharged, for the purposes of section 50(6) and (7), TMA.

HMRC did not challenge the FTT's finding as to the level of tax deducted, but it disagreed with the FTT's conclusion concerning its lack of power to amend the return and appealed its decision.

UT's decision 

The UT allowed HMRC's appeal.

In the view of the UT, section 50(6) and (7) should be construed so as to enable the FTT to amend a self-assessment return to give effect to the decision which it has made in relation to an appeal before it. 

It had been within the appellate jurisdiction of the FTT to make the decisions of fact which it did, as those findings were made in an appeal "against ... any conclusion stated or amendment made by a closure notice under section 28A". It would therefore be surprising if the FTT was then unable to give effect to its findings by amending the return. 

The UT also considered section 59B, TMA, which is concerned with the payment and collection of tax, and accepted that it was not justiciable before the FTT. However, in the view of the UT, once an amendment is made to a self-assessment return by section 50(6) and (7), section 59B then applies to the amended return just as it does to an original return, or to an amendment following a closure notice which is not appealed.

This decision is helpful in that it confirms that once the FTT decides, as a matter of fact, as it did in this case, what the correct figures are, it must give effect to its conclusions by amending the self-assessment return pursuant to section 50(6) and (7) TMA. Once the amendment has been made, the position is no different in principle from that which exists in relation to any other amendment to a return, in particular, an amendment made as a result of a closure notice. 

A copy of the decision can be found here.

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