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HMRC internal manual

Self Assessment: the legal framework

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HM Revenue & Customs
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Enquiries into Tax Returns: consequential claims

Where a return is amended certain claims may be made that would normally be out of time

Section 43C

The time limits for making claims are not extended simply because an enquiry is open.

The legislation does however allow a taxpayer to take various out-of-time actions where HMRC amends a return in an enquiry closure notice. Section 43C TMA, the section dealing with out-of-time actions following an amendment in an enquiry closure notice, was introduced by Finance Act 2003. It applies where the notice of the amendment is issued after 10 July 2003.

Different provisions apply depending on whether or not the additional liability arises from an amendment made for the purpose of making good a loss of tax brought about carelessly or deliberately by the taxpayer or a person acting on his behalf. If the additional liability is not a result of such conduct the provisions are wider. They extend to elections as well as claims and to the revocation or variation of claims or elections, unless expressed to be irrevocable.

Return amended where loss of tax brought about carelessly or deliberately

Sections 43C(1), 36(3) and 43(2)

Where a return is amended following the completion of an enquiry, and the amendment is made for the purpose of making good any loss of tax brought about carelessly or deliberately by the taxpayer or a person acting on his behalf, then section 43C(1) applies. That subsection applies sections 36(3) and 43(2) to the amendment as they apply to a discovery assessment.

This allows the taxpayer to make an out-of-time claim for a relief or allowance for the relevant year, but only against the additional liability established by HMRC’s amendment. In such cases HMRC accepts that making a claim also includes increasing the amount of a previous claim. The claim should be notified to the officer before he makes the amendment (where section 36(3) applies), or may be made at any time before the end of the year of assessment following that in which the amendment was made (under section 43(2)).

Return amended - no careless or deliberate conduct

Sections 43C(2), 43(2), 43A and 43B

Where a return is amended following the completion of an enquiry, and there has been no careless or deliberate conduct, then section 43C(2) applies. That subsection applies sections 43(2), 43A and 43B to the amendment as they apply to a discovery assessment.

This allows the taxpayer to make an out-of-time claim, election or application and give a notice for the relevant year, within one year from the end of the year of assessment in which the assessment is made. (Section 43A(2) and 43C(2) TMA.) The taxpayer can also revoke a claim or election already made, or amend a claim or election, except where it is irrevocable in law.

The effect of the taxpayer making, revoking or amending a claim or election is limited to the amount of tax charged by the amendment (section 43(2) and 43B(3)).

Specifically excluded from S43A by subsection (2A) are:

  • elections to transfer the married couple’s allowance
  • elections to transfer children’s tax credit, and
  • an election for assets to be re-based to 1982.

Where the taxpayer’s action would alter the liability of another person, they need the written consent of that other person - section 43B(1).