Richard Warner v The Commissioners for HMRC

HMRC submits that there is no appealable decision and that therefore the appeal is outside of HMRC’s jurisdiction.

HMRC argue that they have not opened an enquiry into the SDLT returns and have not issued a closure notice.

Their actions in response to the 3 July 2018 claim letter were simply to refuse the claim, explaining that the refusal was based on non-compliance with time limits. This response did not open an enquiry. They rely on the decision of the Court of Appeal in Raftopoulou and the Upper Tribunal in Portland Gas in support of this position.

HMRC also submit that Mr Warner’s correspondence with their debt management teams also did not constitute the opening or operation of any enquiry.

HMRC submit that they have not made any of the decisions listed at paragraph 35 of Schedule 10 to Finance Act 2003, which provides a list of appealable decisions.

Since there is no appealable decision, there is no appeal for Mr Warner to notify to the Tribunal under Paragraph 36A(2)(c) of the same Schedule.

HMRC also refer to the decision in Secure Service v HMRC [2020] UKFTT 59 (TC) which concluded at [67] that the Tribunal “… has no jurisdiction to hear an appeal against HMRC’s refusal to allow a late claim for multiple dwellings relief…”.

HMRC also submit that there are no circumstances in which the words “except as otherwise provided” are engaged with regards to an amendment to a SDLT return. They rely on the Court of Appeal’s decision in Candy in support of this position.

In the alternative, HMRC submit that since no dwellings were purchased, a claim to MDR would not have been appropriate and a claim under Case A of paragraph 34 (for overpayment relief) would not succeed. They rely on the wording of section 58D to conclude that a claim for MDR cannot be made using paragraph 34 since that would override the statutory time limit. They rely on Secure Service in support of this position.

Mr Warner submits that there has been an appealable decision and that therefore the strike out should not be granted.

He submits that HMRC opened an enquiry into his SDLT returns and that this was apparent from his correspondence with the debt management team (DMEIS) and others. He states that it was clear from correspondence and telephone calls that HMRC retained an “open mind” as to whether he could make a claim for MDR and therefore there must have been an enquiry. One of the letters from the DMEIS explained the procedure for making a claim, which, he argued, supported the fact that HMRC was making further enquiries.

In support of this, he relies on Portland Gas as the basis for the absence of a need for formality in the opening of an enquiry. He argues that what HMRC did amounted to the opening of an enquiry and that he was under the impression that an enquiry was ongoing.

He also submits that HMRC issued a closure notice when they refused his claim and that this was the appealable decision.

In the alternative, if HMRC has not issued a closure notice, Mr Warner argues that this Tribunal has the power to direct one under paragraph 24 of Schedule 10 to FA 2003.

Mr Warner also argued that the words “except as otherwise provided” in paragraph 6(3) of Schedule 10 to FA 2003 should be exercised in this case as a matter of common sense to allow a longer period for a claim to make an amendment.

He also raised arguments based on his ill-health, specifically being admitted to hospital in September 2016, and again in March 2017 for issues related to a detached retina that resulted in him being unable to work for several months; and a further admission to hospital following a serious fall in September 2017. He argued that he would have been able to make the claim in time if he had not suffered these periods of ill-health.

In the alternative, Mr Warner submits that the claim set out in his July 2018 claim letter should be treated as an overpayment claim pursuant to paragraph 34, which has a 4-year time limit. This claim was submitted well within the 4-year time limit and he was therefore not out of time. Specifically, he relies on paragraph 34(2) which allows for a claim “for discharge of the amount”, arguing that it was not due in the first place.

The following application was not disputed:

I have the following points to decide:

In considering the first question, I have the benefit of the earlier decisions in Portland Gas, Raftopoulou and Secure Service.

In Portland Gas [2014] UKUT 270, the Upper Tribunal considered whether the taxpayer had amended their land transaction return within the statutory time limit. Although it related to an agreement for lease, the same legislative provisions apply.

The Upper Tribunal considered that it needed to answer three questions (paragraph 31):

“(1)

Did HMRC’s response of 12 August 2012 or any of its later letters show that it had opened an enquiry into the amended return;

(2)

If so, did any of those letters amount to a closure notice giving rise to a right of appeal under paragraph 35(1)(b); or

(3)

If none of those letters amounted to a closure notice did any of them give rise to the right to ask the FTT for a direction that a closure notice be issued with the consequence that an appealable decision would thereupon arise under paragraph 35(1)(b) of Schedule 10?

The Upper Tribunal found that HMRC’s actions following Portland’s letter amending the return did amount to the opening of an enquiry, noting (at paragraph 46):

“In our view the further steps that it took, namely to seek legal advice on the arguments raised by Portland, did amount to an enquiry within the ordinary meaning of that term. In essence, the question is one of degree and in our view the further steps taken indicate the undertaking of an “examination”, “investigation” or “scrutiny” of the return.”

They went on to conclude that the same letter was sufficient to be a notice of HMRC’s intention to enquire into the return, noting (at paragraph 48) that:

“a notice of enquiry need not be in any particular form, the only requirement being that it gives notice of an intention to enquire into a land transaction return. In our view the letter of 6 September 2012 achieved that. In our view consistent with the policy in section 83(2) FA 2003, a communication should be regarded as giving notice of an intention to enquire provided the intended effect is reasonably ascertainable by the person to whom it is directed. In our view Portland would clearly ascertain from HMRC’s letter that there was an intention to enquire further into the return in the light of the further submissions made by Portland’s solicitors.”

They went on to conclude that later correspondence amounted to a closure notice and that therefore an appealable decision had been made.

HMRC were given permission to appeal this decision to the Court of Appeal. However, Portland withdrew their appeal and attempt to amend their SDLT return before the hearing and therefore no substantive hearing of the case was heard by the Court of Appeal.

In Raftopoulou [2018] EWCA 818, the Court of Appeal did have a chance to consider a substantive issue of a similar nature, albeit not in relation to SDLT. They had to decide whether HMRC’s rejection of her income tax repayment claim gave rise to a right of appeal.

The Court of Appeal framed the questions in the following way (paragraph 36):

“There can be no enquiry into a claim without HMRC giving the notice required by paragraph 5. Whether the letter or other communication in question gave the necessary notice depends on whether it would be read by a reasonable recipient in the position of the taxpayer as doing so. The same is true of any document said to be a closure notice. These are questions of law.”

The Court of Appeal decided (paragraph 40):

“a rejection by HMRC of a claim on the grounds that it is out of time, by reference to no more than the claim itself and a calculation of the applicable time limit, does not involve any use by HMRC of their statutory powers to enquire into the claim nor does it constitute notice of an intention to do so.”

It went on to say (paragraphs 49-50):

“The statute is clear: once a decision is taken to open an enquiry, the HMRC officer must give notice to the taxpayer of his intention to enquire into the claim. Under the scheme of these provisions, the notice precedes the enquiry under paragraph 5 and alerts the taxpayer to the start of a formal process with its attendant statutory powers available to HMRC.

50.

I conclude therefore that HMRC’s letter in this case could not serve both as a notice under paragraph 5 and as a closure notice under paragraph 7. I find it difficult to think that the same document could ever serve as both but, as not every circumstance can be foreseen, I do not express a concluded view.”

With these decisions and principles in mind, my first question is to consider whether the correspondence from HMRC could be read as giving notice of an intention of HMRC to enquire into the return.

The substance of the letter from HMRC dated 19 July 2018 was as follows:

“Thank you for your letter dated 3 July 2018. I received this letter on 6 July 2018.

Section 58D of the Finance Act 2003 states that claims for Multiple Dwellings Relief (MDR) must be made in a land transaction return or in an amendment to a return. Under Paragraph 6 of Schedule 10 to the Finance Act 2003, an amendment can be made no later than 12 months after the filing date for the return. The filing date for a land transaction return is 30 days after the effective date of the transaction.

The filing date for this transaction was 24 June 2016. The deadline for an amendment to the return was 24 June 2017. As your request was received after this date I am unable to process it as an amendment. There is no right of appeal against a refusal to process a late amendment.

As a claim for MDR can only be made in a return or an amendment to the return I cannot consider your request under any other part of the SDLT legislation.

Therefore, £109,500 Stamp Duty Land Tax (SDLT) remains outstanding on this account.”

The letter went on to consider the interest that would be payable on the outstanding SDLT because none of it had ever been paid.

The letter of the same date related to the second transaction was in identical terms, save for the value of the SDLT.

In my view, this letter falls squarely into the description used in Raftopoulou. It was a rejection of the claim “by reference to no more than the claim itself and a calculation of the applicable time limit”.

No reasonable taxpayer could have interpreted this letter as constituting a notice of an intention to enquire further. Unlike in Portland Gas, there was no mention of HMRC’s need to seek further information from internal or external sources. It simply sets out the time limits that apply to a claim for MDR and the relevant dates for these transactions before concluding that the claim is out of time and cannot be processed.

I must next consider whether the later correspondence from HMRC can be treated as a notice of enquiry. Mr Warner pointed in particular to a letter from DMEIS on 7 June 2019. The bulk of the letter dealt with the matter at hand, which was an application by Mr Warner for set aside in the context of potential bankruptcy proceedings by HMRC. The letter included the following section (emphasis in the original):

“I am prepared to withhold further enforcement proceedings for a period of 3 months to allow you time to submit a formal MDR application to the stamp duty office and for you to receive a formal decision letter of response from them. As discussed this has the possibility of two outcomes. Your debt balance may be reduced or you will receive confirmation that you are out of time to make a claim.

If the latter formal decision is delivered from the stamp duty office and you disagree with the decision you can then submit an appeal application to the Tribunal Court. This would mean that HMRC would not be able to proceed with enforcement action until your tribunal case has been heard and a decision delivered. Please note if you do appeal and the tribunal office does not accept your application because you have not completed the application correctly or your case does not fulfil the appeal criteria HMRC would then recommence their enforcement action. To avoid this, payment in full would need to be made or an effective repayment plan negotiated and agreed within 14 days.”

Mr Warner suggests that this is evidence that HMRC were keeping an open mind about whether an MDR claim could still be made and that is evidence of an enquiry being open.

There are features in that letter which support Mr Warner’s position, namely the suggestion of being allowed time to submit a formal MDR claim and the implication that an appeal could be made to this Tribunal where HMRC have made a decision that a claim is out of time.

We did not have evidence from the officer concerned within DMEIS and so we don’t know whether these were included because she was not aware that Mr Warner had already made a claim that had been rejected as out of time and was not aware that such a decision was not appealable or because she made mistakes in drafting the letter.

However, in my view, these factors are not enough to be able to reach a conclusion that this letter was evidence of a notice of intention to enquire. At most, the letter provides Mr Warner with encouragement to make another claim. The letter also makes a clear distinction between matters within the purview of DMEIS and those within the purview of the “Stamp Duty office” who would actually deal with such claims. A reasonable taxpayer in Mr Warner’s position would have been able to understand the difference between the two parts of HMRC and that the officer from DMEIS was not stating that the stamp duty office would open an enquiry.

Given I have concluded that there was no enquiry opened, there is no question of whether there was a closure notice or a right to require HMRC to issue one.

On the first question, therefore, I find that there has not been an appealable decision in relation to a claim for MDR.

I will now move on to considering whether the proviso “except as otherwise provided” in paragraph 6(3) extends the time limits for making the amendment.

The Court of Appeal in Candy v HMRC [2022] EWCA Civ 1447, have considered the interaction between paragraph 6(3) and a claim for repayment under section 44(9) of FA 2003. Mr Candy sought to rely specifically on the words “except as otherwise provided” in order to enable him to make the claim outside of the 12-month limit.

HMRC sought to rely on the following paragraphs 50-51 to support their argument that there are no statutory exceptions that extend the time limit beyond 12 months:

“50.

Nor can I see any rational reason why Parliament would have wished to dispense altogether with the generally applicable time limit in paragraph 6(3), enabling taxpayers to make claims for repayment without any time limit, even decades later when memories may have faded and documents relating to the original land transaction may have been lost. There is nothing inconsistent in Parliament providing a right to reclaim tax paid as a safeguard for innocent taxpayers caught by the widely worded charge in section 44(4), but at the same time making that right subject to clear procedural rules, including time limits on the right to reclaim payment. It is of the essence of a self-assessment system that tax effects can be undone by administrative failure and merely meeting the substantive conditions for the grant of a relief is rarely enough to secure that a taxpayer receives the relief in question. Where the relief requires a claim, and the claim is not made in accordance with any procedural requirements, the taxpayer will not be given the relief.

51.

Moreover, hard-edged time limits are a common feature of the self-assessment scheme. Where they govern the availability of a relief, they have the inevitable potential to cause hardship. In the case of section 44(9), a balance between the competing objectives of preventing tax avoidance on the one hand, and relieving innocent transactions caught by section 44(4) on the other, was clearly intended by Parliament. Since the longer the period of substantial performance lasts without completion of the contract, the more likely it is the purchaser will have obtained benefits under the contract in a way that justifies maintaining the SDLT charge, it was rational to strike that balance with a time limit of 13 months for amending the return from the effective date of the transaction giving rise to substantial performance (in other words, 12 months after the filing date). This limits the scope for avoidance but is simple to operate (for both HMRC and taxpayers). I can see no good reason why the unambiguous, hard-edged time limit in paragraph 6(3) should yield to section 44(9) as Mr Thomas contended. The consequence of Mr Thomas’ construction is to dispense with certainty and finality in the sound administration of SDLT. That would be a surprising result.”

Mr Warner sought to distinguish Candy on the basis that it was not dealing with a MDR claim. He pointed to paragraphs 53 and 54 of the decision to support his position:

“53.

Accordingly, in my judgment the word “afterwards” does not provide an (otherwise unarticulated) exception to the time limit generally applied by paragraph 6(3) for making amendments. It has nothing to do with time limits at all. Once the duty to repay arises, the second sentence of section 44(9) requires a claim to be made by way of amendment of the original return. That can only be done in the period specified by paragraph 6(3).

54.

I recognise that the consequence of this conclusion is that the words in paragraph 6(3) “Except as otherwise provided” had no substantive effect on enactment. The presumption that all words in a statutory provision should have substantive effect is a presumption that can be displaced. In any event Mr Thomas does not dispute that those words could have been intended to be forward looking only, to account for future amendments. While that may be regarded as an odd drafting technique since a future amendment could have inserted those words when a subsequent exception was introduced, I agree with the UT that the words are likely to have been included in Part 4 FA 2003 as a helpful aid to the reader, to point out for the future, that the generally applicable time limit might be countermanded elsewhere.”

Mr Warner is of course correct that Candy does not deal with a MDR claim. However, the decision sets out principles for the interpretation of the SDLT provisions and paragraph 6(3) specifically. I cannot see any basis on which I can diverge from it in the context of a .

In any event, in my view, the words “except as otherwise provided” are intended to provide a reference point to other provisions within the legislation that could provide for a different time limit. They do not allow for a general discretion not to apply the limit, as is suggested by Mr Warner.

Applying the principles in Candy, I must consider the purpose of Schedule 6B. It is clear from the face of the legislation that it is intended to deal with transfers of more than one dwelling either in the same transaction or in two linked transactions. In those circumstances, a relief from SDLT applies which is designed to achieve the effect that the rate of SDLT payable is the same as it would have been had each dwelling been acquired individually and not with other dwellings. This is achieved by dividing the total consideration for the dwellings by the number of dwellings acquired to find the average price. The rate of SDLT is then based on that average price instead of on the total consideration and the SDLT payable is multiplied by the number of dwellings acquired.

Section 58D(2) then requires that such relief must be claimed in a land transaction return or an amendment to a return.

Paragraph 6(3) then requires that any such amendment is made within 12 months of the filing date.

Respectfully adopting the conclusions of the Court of Appeal in Candy, there is nothing inconsistent in Parliament providing a right to reduce the amount of SDLT payable where more than one dwelling is acquired in the same or linked transactions, but at the same time making that right subject to clear procedural rules, including time limits on the right to claim that relief.

That is what paragraph 6(3) does in the context of a claim for MDR and there is no facility for HMRC, or this Tribunal, to apply a different time limit due to ill health or external circumstances that have occurred after the transaction to acquire the property.

I turn finally to the possibility of applying the overpayment relief provisions in paragraph 34 of Schedule 10 to FA 2003.

Mr Warner submits that he can rely on paragraph 34 in order to be able to make his claim within a 4-year period, rather than 12 months and that his letter making the claim could be interpreted as being a paragraph 34 overpayment relief claim.

HMRC submits that paragraph 34 claims do not override other existing claims rules and that paragraph 34A(4) makes that clear.

I find that overpayment relief is not relevant in this case. A claim for MDR is not a claim for overpayment relief. The SDLT payable (I note that it was not in fact paid) by Mr Warner was the SDLT set out it in the returns. The avenue for him to reduce that amount through MDR was through an amendment to his returns in accordance with section 58D, not under paragraph 34.

In any event, if it could have been achieved using an overpayment relief claim, HMRC would have been within their rights to refuse it pursuant to case C because there is a time-limited means of making the claim but Mr Warner did not use it.

This is aligned with the decision of the First-tier Tribunal in Secure Service Limited v HMRC [2020] UKFTT 59.

Mr Warner raised matters that occurred after the purchase of the two plots of land, including the lender going into liquidation, depressed valuations of the land, delays in the local authority granting permission for the proposed development. I have seen this evidence and for completeness, I note that none of it is relevant to the question at hand, that is whether an appeal can proceed in this Tribunal.

For the reasons I have given, I find that no appealable decision has been made by HMRC and there are no other issues that can be determined by the Tribunal. Therefore I must strike out the appeal in accordance with the Tribunal Procedure Rules for lack of jurisdiction.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.