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HMRC internal manual

Debt Management and Banking Manual

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HM Revenue & Customs
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Enforcement action: country court proceedings: the defendant’s response to the claim: defence on the grounds that self assessment displaces a determination

Where you are taking proceedings for a Revenue determination, the defendant may submit a defence on the grounds that a lesser figure is due. The defendant may have already filed a tax return or have promised that they, or their agent, will do so. This type of defence can be used as a tactic to delay payment further.

Some judges have been known to accept this argument and, because of this, do not give judgment at a hearing but instead order the defendant to file returns by a particular date.

Self assessment not filed at time of hearing

If a return has not been filed, but the defendant claims that when filed it will show that a lesser amount is due, you should seek judgment in full. You should advise the judge and the defendant:

  • that the determination amount remains due until the return is filed and captured
  • when the return(s) should have been filed by to illustrate the extent of the defendant’s default.

The defendant:

  • is personally responsible under Section 9 Taxes Management Act 1970 to provide a self assessment of his income and gains
  • has the right under Section 59A(4) Taxes Management Act 1970 to make a claim to adjust the payment on account.

Nevertheless the judge may not be prepared to enter judgment in full and may be minded to adjourn the hearing whilst ordering the defendant to file the return(s) by a particular date. If so, you should ask the judge to consider making an order for interim payment of any amount the defendant admits will be due, with an order that if the defendant fails to file the return(s) by a specified date then you (as claimant) will be entitled to judgment for the balance of the claim.

Self assessment filed but not processed at time of defence hearing

Ensure that Customer Ops recognise the urgency and importance of capturing the return(s) and ask them to process the return(s) as a matter of urgency.

At the defence hearing you should:

  • try to obtain judgment in full
  • point out that until such time as the Inspector is satisfied that the return, which was submitted late, is correct, the determination remains payable.

You should assure the judge, and the defendant, that should the return show a lesser amount payable, you will only seek to recover the lesser amount, together with interest thereon, and the court fee. However, in practice, you will frequently find that judges are reluctant to enter judgment in these circumstances.

If you cannot secure judgment in full at the first hearing, you should ask for:

  • an order for interim payment of any amount that the defendant admits, including interest
  • the hearing to be adjourned for sufficient time to allow the return(s) to be processed.

Self assessment filed and processed before the defence hearing

Reduced amount payable

In all cases write to the defendant asking for payment of any amount outstanding.

If there is sufficient time, seek the agreement of the defendant to file amended particulars of claim (see DMBM665460).

Otherwise present the revised figures at the defence hearing and ask for judgment.

Nothing payable

Where the debt is extinguished on processing the return:

  • advise the court and the defendant that you are withdrawing from the action
  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Time limit for accepting a return to displace a determination

On 1 April 2010 the time limit to accept a return to displace a determination changed from 5 years to 3 years.

This change was introduced by Paragraph 2 of Schedule 39 to the Finance Act 2008. This changed the time allowed in Section 28C(5)(a) Taxes Management Act 1970 from 5 years to 3 years from the filing date, and the change took effect on 1 April 2010 in accordance with the Finance Act 2008, Schedule 39 (Appointed Day, Transitional Provisions and Savings) Order 2009 (SI2009/403).

Under Section 28C(5) Taxes Management Act 1970 a return can only displace a determination where it is received by the later of:

  • three years from the filing date
  • 12 months from the date of the determination.

Returns received outside of the time limit cannot be accepted unless the transitional period applies as outlined below.

Transitional period

Article 10(2) of the Finance Act 2008 Schedule 39 (Appointed Day, Transitional Provisions and Savings) Order 2009 (SI2009/403) provided for the five year time limit to continue to apply until 1 April 2012 if certain conditions were satisfied as outlined below.

Until 1 April 2012 the five-year time limit continued to apply where both the:

  • notice to make the return was given more than one year after the end of the tax year for which the return is required, for example, notice to make a 2007-08 return was given after 5 April 2009
  • net tax payable (after PAYE etc) shown on the return is less than the determined amount or the return shows an overpayment.

If you receive a defence where the time limit for displacing a determination has expired, write to the defendant on the following lines:

“Thank you for the information contained in the form you sent [me] for [insert year]. The time limit for a [insert year] self assessment ran out on DD/MM/YYYY. The legal basis for this is contained in Section 28C(5) Taxes Management Act 1970.

I received your form after this date and therefore the determination I sent you on [enter date] remains in force and due for payment. I enclose [a] certificate[s] of debt.

In the circumstances please withdraw your defence in this action and pay the amount due”.

Enclose [a] certificate[s] of debt with your letter.

At the defence hearing, ask for judgment for the full amount of your claim.