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Tribunal overturns HMRC denial of special relief claim

By Gabelle LLP

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On 27 August 2015 the First-Tier Tribunal decision in the case of James Ronaldson Scott v HMRC was issued.  The case concerned the appellant’s previously disallowed claim for special relief under Schedule 1AB Paragraph 3A TMA 1970.


Mr Scott submitted his self assessment tax returns for the years ending 5 April 2007 and 2008 on 30 November 2012, some considerable period of time after the prescribed filing dates.  As the returns were outstanding, HMRC issued determinations for both years, on 4 June 2008 and 25 June 2010 respectively.  The only way to displace the determinations would have been for Mr Scott to submit the outstanding returns by 31 January 2011 and 2012.  The returns filed on 30 November 2012 were therefore out of time both in relation to the statutory filing date and in terms of displacing the determinations.  The only remaining route open to Mr Scott to challenge the determinations was to claim special relief.

The legislation details three conditions that must be met to ensure a valid claim:

  1. It would be unconscionable for the Commissioners to seek to recover the amount (or withhold repayment if already paid);
  2. The person’s affairs (as respect matters concerning the Commissioners) are otherwise up to date or arrangements have been put in place to bring them up to date; and
  3. The appellant has not made a previous claim for special relief

Mr Scott argued that his returns had been filed late due to the ‘serious sickness over a prolonged period and subsequent death of his previous accountant’.  He had been advised that everything was in hand in relation to his accounts prior to the accountant’s death on 17 June 2012.

He also argued that the amounts determined by HMRC were excessive in relation to the tax due.

HMRC refused the original claim for special relief made by Mr Scott on the basis that he had previously failed to submit his tax returns on time and had been subject to legal proceedings by HMRC. He therefore failed Condition B above.


It was agreed by both parties that the definition of ‘unconscionable’ could be taken from the case of Maxwell v HMRC [2013] UKFTT 459 (TC):

‘Unconscionable means “completely unreasonable” or “unreasonably excessive” and in so considering HMRC must assess the behavior of the Appellant as to whether it is what might be expected from any reasonable person in a similar situation.’

Following another special relief case, that of Currie v HMRC [2014] UKFTT 882 (TC), it was considered that the primary decision as to whether it was ‘unconscionable’ for HMRC to issue the determinations was one for HMRC alone and this could only be overturned by the Tribunal if unreasonable in a judicial review sense.

The original decision made by HMRC could therefore only be challenged on ‘Wednesbury’ principles, as articulated in the case of Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223.  This referred to the lawfulness of the decision-making process and whether all relevant factors are taken into account, and non-relevant factors ignored, in reaching a decision.

The Tribunal applied these principles in examining the original decision made by HMRC.  It was clear that at no stage did the decision-maker take into account that the determinations were ‘unreasonably excessive’ in relation to the tax due.  The tax due for 2006/07 was £2,186 while the amount determined was £4,080, with an even greater disparity in 2007/08 where tax due was £1,568 compared with the £7,182 determined.  The Tribunal believed that this significant disparity should have prompted the decision maker to make further enquiries.

At no stage did HMRC focus on this issue and rather concerned themselves solely with the past compliance history of the appellant which, it was agreed by all parties, was ‘most unimpressive’.  The Tribunal therefore found that the original decision was unreasonable in a Wednesbury sense as HMRC had failed to take into account the excessive determinations and had reached a decision based on an entirely non-relevant issue.  It followed that the decision was also unreasonable in a judicial review sense and could be set aside.

The Tribunal added that while they were not obliged to express a view in relation to the illness of the accountant, it was considered highly unlikely that this argument alone would have justified a claim for special relief.  Mr Scott was responsible for ensuring that his tax affairs were kept up to date and his failure to do so could not rest solely on the ill health of his accountant.

The decision is important for taxpayers, as it demonstrates that HMRC do need to consider all factors when considering whether to allow special relief, even when the taxpayer’s compliance history was ‘unimpressive’.  Advisers should ensure that when claiming special relief they carefully consider all three conditions above and where necessary challenge HMRC’s decision maker.

Published September 2015