Do As We Say – Not As We Do!

The UK tax system can seem harsh, hostile and unforgiving if taxpayers make mistakes when dealing with their tax affairs, such as where tax return errors result in penalties.

HM Revenue and Customs (HMRC) also makes mistakes. For example, procedural and administration errors sometimes occur when HMRC opens an enquiry into tax returns. Of course, HMRC is not subject to penalties for its errors (although some taxpayers and advisers probably feel that they should!). However, errors can sometimes result in (for example) HMRC losing the right to raise tax assessments or open enquiries into a taxpayer’s self-assessment return.

HMRC’s ‘clerical slip’

Unfortunately, HMRC errors will not always be considered fundamental enough to have such serious repercussions. HMRC may also be able to call upon a statutory protection (in TMA 1970, s 114) concerning errors in assessments etc. to ‘save’ faulty documentation (see below).

In Revenue and Customs v Mabbutt [2017] UKUT 289 (TCC), HMRC issued by letter notice of its intention to enquire into the taxpayer’s tax return ‘for the year ending 6 April 2009’ by mistake (i.e. instead of ‘for the year ending 5 April 2009’). HMRC’s enquiry nevertheless proceeded. The taxpayer appealed against HMRC’s eventual closure notice, on the basis that no valid notice of enquiry had been given.

The First-tier Tribunal held that because of the above mistake, HMRC’s letter did not constitute a valid notice of enquiry (under TMA 1970, s 9A), and that s 114 could not save it. The taxpayer’s appeal succeeded. However, HMRC appealed to the Upper Tribunal (UT).

The UT held (among other things) that HMRC’s letter to the taxpayer constituted a valid notice of enquiry. It was considered that a reasonable taxpayer reading the letter would have concluded that HMRC intended opening an enquiry and that the reference to the year ended 6 April 2009 was simply a minor clerical slip. HMRC’s appeal was allowed.

Faulty documentation ‘saved’?

 In view of the UT’s conclusion that HMRC’s letter to the taxpayer constituted a valid notice (i.e. HMRC’s communication to the taxpayer was considered to have been clearly sent in response to a tax return submitted; the only tax return the taxpayer submitted was for the tax year ended 5 April 2009; only one tax year ended in April 2009, which was for the year ended 5 April 2009), it was strictly unnecessary for the UT to consider whether any alleged defect in the notice could be ‘cured’ by TMA 1970, s 114 (‘Want of form of errors not to invalidate assessments, etc.’). However, the UT held that s 114 would have applied to cure the defect in the enquiry notice.

Taxpayers may sometimes be disappointed to find that HMRC errors can be corrected by the application of s 114, particularly where HMRC would otherwise be out of time to issue a new and corrected assessment or notice.

Section 114 broadly states that HMRC documentation (e.g. assessments, notices, etc.) are not invalidated by a mistake, defect or omission, if the documentation is ‘in substance and effect in conformity with or according to’ the intention and meaning of the tax legislation, and if the relevant person or property is ‘designated therein according to common intent and understanding’. Furthermore, in broad terms an assessment or determination is not ‘impeached or affected’ due to a mistake as to the taxpayer’s name, the description of any profits or property, or the amount of tax charged, or due to any variance between the notice and the assessment or determination.

In Mabbutt, the UT held that, leaving aside the mistaken date, the notice was clearly intended to refer to HMRC’s intention to open a tax return enquiry, and the error could have left a reasonable recipient taxpayer in no doubt as to what was intended. Taxpayers in several other cases have similarly been unsuccessful in claiming that tax assessments, penalty notices etc. were invalidated by HMRC errors in them (e.g. GDF Suez Teeside Ltd v Revenue and Customs [2017] UKUT 68 (TCC); Donaldson v RCC [2016] EWCA Civ 761).

Practical point

However, in Baylis v Gregory [1989] 1 AC 398, a tax assessment for 1975/76, which was incorrectly stated to be for 1974/75, was held to be a critical mistake, and TMA 1970, s 114 was not apt to overcome such a fundamental error. More recently, in Chadwick (as trustee in bankruptcy of Oduneye-Braniffe) [2017] UKFTT 656 (TC), it was held that assessments issued in error to a trustee in bankruptcy could not be cured by s 114. On the other hand, taxpayers (and advisers) who spot minor errors may face an uphill struggle trying to convince HMRC and the tribunal that s 114 does not ‘save’ the incorrect notice, assessment, etc. As always, the specific facts and circumstances of each case must be carefully considered.

 The above article was first published in Tax Insider in January 2018 (

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