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HMRC internal manual

Debt Management and Banking Manual

Summary Proceedings (Sc): Small claims - answering defences: Defences and 'finality principles'

In cases where a defence is lodged stating for example that

  • the assessment is wrong or
  • the sum due is too high or
  • the defender was either not trading or
  • carrying out a different trade at the time

it can be dealt with relatively simply.

The Taxes Management Act 1970 governs the assessment and collection of most tax, and other duties that are collected as if they were tax, (such as Class 4 NIC or Reg 49 determinations). It provides the customer with rights to appeal to the tax Commissioners to resolve objections or issues in connection with tax liabilities. The customer is given rights to exercise in relation to his or her tax affairs and these are set before them at each stage in the process. Most customers do exercise their rights but if they do not, then the tax or other charge becomes final.

These principles have been established in cases that have been decided by the higher courts and are often referred to as the “finality principles”. Their effect is that if the customer has rights to appeal to the commissioners about their tax or NIC liabilities, they cannot raise them in the sheriff court.

The principles can be summarised as follows and it is essential that you familiarise yourself with them before attending court

In practice this means that if the statutory requirements have been met then the only defences to a claim for tax are those that relate to the tax itself and not to the assessment.

  • the taxpayer must either make a self assessment (TMA 1970(S9)) or be served with a notice of assessment (TMA 1970 S30A(3))
  • the taxpayer has a right to appeal to the commissioners against an assessment or an amendment to a self assessment (TMA70/S31) (but not against their own self- assessment; a SA or COTAX determination or employer’s liabilities)
  • if the taxpayer does not appeal, the debt is held to be absolute (Commissioners for Her Majesty’s Revenue and Customs v Pearlberg) (DMBM665910)
  • if the taxpayer does appeal then the debt is final and conclusive (TMA70/S46(2))where the case is either
    • heard and determined by the Commissioners (TMA70/S50) or
    • determined by agreement (TMA70/S54) (Commissioners for Her Majesty’s Revenue and Customs v Aken) (DMBM665910)


    • the taxpayer may appeal to the Court of Session but only on a point of law and the tax remains payable in accordance with the commissioners’ determinations anyway. (TMA70/S56(9)).