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HMRC internal manual

Self Assessment: the legal framework

Claims, Elections and Notices: Claims, Elections and Notices included in Tax Returns: general procedures for making claims

Wherever possible claims should be included in a tax return

Sections 42(1), (2) & (10)

The general rule is that wherever possible, any claim provided for in the Taxes Acts must be included in a tax return, or an amendment to a tax return. Taxpayers who are not dealt with under self assessment (for example, many PAYE taxpayers) are not sent a tax return form or a notice to file. These taxpayers are not expected to make a tax return simply in order to make a claim. They can make a claim outside a tax return under the procedures in Schedule 1A (see SALF604 onwards).

Where a claim is included in a tax return it is subject to the same ‘process now - check later’ procedures as any other entry in the tax return. For example, HMRC have the right to correct obvious mistakes or errors in a claim (eg Section 9ZB). They also have the right to formally review the validity and accuracy of a claim (eg by means of Section 9A) including the right to request any information or documents relating to the claim (FA08/Sch36).

Claims must be quantified at the time they are made

Section 42(1A)

A claim for a relief, allowance or repayment of tax must be quantified at the time the claim is made. It is not possible to make a ‘provisional’ claim in an estimated amount. (This rule applies to claims, but not elections or notices.)

This rule must be considered in conjunction with the guidance given on the use of provisional figures in tax returns (see Use of provisional figures in tax returns in SALF206). Section 42(1A) is intended to deny claims anticipating relief that may or may not arise at some future point in time. For example, if a business is doing badly the owner may think that it is ‘making a loss’, but until the relevant accounting period has ended there is no certainty that there is in fact a loss for tax purposes.

However, where, for example, a loss has been established, but the exact amount of that loss cannot be finalised before a return is filed, the taxpayer’s ‘best estimate’ is acceptable as quantification of the claim. As with any other provisional figure the claimant is expected to provide the final figure as soon as it is available.

A claim made in respect of an allowance or relief that, by its nature, is fixed in amount (for example, a personal allowance) is treated as a claim ‘quantified at the time made’ even if the person making the claim does not know the actual amount due.

Exceptions to the general rules

Certain claims are specifically excluded from the requirement to include a claim in a tax return. They are claims that are given effect by:

  • a PAYE coding adjustment (Claims given effect by a PAYE coding adjustment in SALF603 - such claims are also excluded from the requirement to quantify the claim), or
  • a ‘carry back’ of relief to an earlier year (SALF611 - paragraph 2(2) Schedule 1B).

In addition the general time limit for claims of four years from the end of the relevant tax year (Section 43(1) - see SALF613) means that in many cases a claim for a particular year may be made after the tax return for that year has become final. In any such case the Schedule 1A procedures must be used (SALF605 to SALF610).

Claims given effect by a PAYE coding adjustment

Section 42(3)

Most employees do not have to complete tax returns. This is because wherever possible the PAYE system is used to collect the correct amount of tax. If, at the end of the year, the taxpayer has paid too much tax the tax overpaid is repaid automatically without the need for a formal claim.

The requirement to include a claim in a tax return does not apply where that claim will be given effect by an adjustment to a PAYE coding. This is because a claim given effect in this way is allowed before the tax return for the year is issued. An employee who wishes to have his or her code adjusted during the course of a tax year is able to use the Schedule 1A procedures (SALF605 to SALF610) to make the claim outside a tax return.

But claims made in the tax year which take effect through PAYE have to be repeated on the self assessment tax return, so that the self assessment takes account of them. Where the taxpayer realises that an in-year claim was omitted from the tax return, the taxpayer or HMRC can amend the tax return to correct an obvious error.