Overpayment relief: Special relief: Condition A - Unconscionable to recover or not to repay an amount
It is a condition of special relief (Condition A) that in the opinion of the Commissioners it would be unconscionable for HMRC to seek to recover the amount which is the subject of a special relief claim (if it is charged in a determination) or to withhold repayment of it (if it has already been paid).
Unconscionable means completely unreasonable or unreasonably excessive.
Special relief is intended as a final and exceptional remedy where it would be unconscionable for HMRC to pursue tax that is legally due. HMRC has a duty to both Parliament and taxpayers generally to collect the tax due under relevant tax law and to ensure the tax system is operated fairly. This means that HMRC cannot simply disregard the time limits for making a self-assessment if it appears that a determination might be excessive. There must be further circumstances which make it unconscionable to recover the full amount due under the determination or not to repay an amount already paid.
For a claim to special relief to be successful, it must, among other things:
- explain why the person considers that it would be unconscionable for HMRC to recover the full amount charged by a determination
- explain why the person did not submit their return within the time limit for displacing the determination.
A determination has to be estimated because it is only issued where a return has not been received by HMRC. The fact that a determination is higher than the amount which would have been shown on the return if it had been submitted within the time limit is not, on its own, sufficient.
A claim to special relief should explain what circumstances caused the person to fail to submit the return within the time limit for displacing the determination. Such circumstances might be where a person:
- is considered vulnerable (see SACM12245)
- has not received our notices or other communications for reasons outside their control
- is insolvent. Where the debt is based on determined sums, and the late submitted evidence (or returns) prove that a different amount would have been due if returns had been made in time, we would consider using this relief. Relief would be considered where doing so is fair to other creditors - so the unconscionable element would be that pursuing the amount in the determination would be to the detriment of other creditors.
So, for example, special relief will not normally apply where a person:
- registers as self-employed and never gets any business but remains in the SA system (we would reasonably expect the person to tell us that the business has ceased and file a nil return).
- ceases self-employment, winds up their affairs (incompletely or incorrectly) but moves on without providing a forwarding address (we expect all people to act reasonably so they should be aware that HMRC has 12 months to enquire into any return; in this situation the person should ensure HMRC has an up to date address or that arrangements are put in place to forward post).
- is a subcontractor who suffers deductions under the construction industry scheme and believes that they have nothing further to pay, so does not respond to determinations and other contacts. (People must take responsibility for their own affairs, or engage an agent to do so; they must not simply ignore HMRC communications in ignorance or in anticipation of later relief; wherever a person is unsure whether or how to respond to HMRC communications they should get in contact with HMRC to find out more.)
- moves abroad and fails to respond to HMRC communications to the point of facing enforcement action for unpaid debts. (We expect people to act reasonably and take responsibility for their tax affairs; where there is a debt on our records, self-assessment statements are issued within 45 days of payment becoming due, and debtors are warned of recovery action at various stages in the debt collection process; there is no excuse for not responding to us well before recovery action is commenced.)
- is negligent and, although aware of their responsibility to pay tax and to file returns on time, fails to act appropriately in relation to their tax affairs and ignores all communications sent to them. (Again people must take responsibility for their own affairs, or engage an agent to do so; they must not simply ignore HMRC communications in ignorance or in anticipation of later relief. Wherever a person is unsure whether or how to respond to our communications they should contact HMRC to find out more.)
EIS is responsible for deciding whether a claim to special relief can be accepted and in particular whether conditions A, B and C are met.
Para 3A(4) Schedule 1AB TMA 1970
Para 51BA(4)Schedule 18 FA 1998