High Court rejects judicial review of recovery of provisional tax repayments
In its decision in R(Amrolia) v HM Revenue & Customs [2018] EWHC 1688 (Admin), the High Court has dismissed a judicial review challenge to HMRC’s ability to recover provisional repayments of tax when, following an enquiry into a partnership return, claimed partnership losses are found by to have been excessive. The claim was supported by an action group, LTAG. If successful, the claimant and those partners whose claims were stayed behind his, would have been able to retain their repayments notwithstanding that the schemes into which the partners invested have been found not to have created the losses claimed.
The claimant, Dr Amrolia, entered into a finance partnership, Tower MCashback 3 LLP, designed to generate partnership losses that could be set against income to reduce his tax liability. He included the claimed partnership losses generated in his tax return and asked for those losses to be set off against his income in previous years (a carry back claim). HMRC gave effect to the claim and made a repayment of tax on a provisional basis. Subsequently, an enquiry into the partnership’s return for the relevant year resulted in the claimed losses being reduced. HMRC wrote to the claimant (under the Taxes Management Act 1970 (TMA), s 28B(4)) to inform him of amendments to his tax return necessary to give effect to the conclusions of the partnership enquiry. This reduced the losses claimed in his tax return such that the provisional repayment was excessive.
The claimant’s case initially was that in those circumstances HMRC had no power to recover the excess over-repayment, absent an assessment under the TMA, s 30. A similar argument was rejected by the Supreme Court in De Silva v HM Revenue & Customs [2017] UKSC 74 (in which Aparna Nathan appeared for HMRC). Following the promulgation of the judgment in De Silva, the claimant’s case became that the notice issued under s 28B(4) TMA did not create an obligation to make a repayment because it did not have the effect of increasing the amount of tax chargeable in the claimant’s self assessment.
The High Court rejected that claim, finding that s 59B(5) TMA creates an obligation to make a payment (or repayment) of tax as a result of an amendment or correction to a self-assessment. That can include an amendment to the claimed losses and does not specify that the amendment or correction has to be to the amount of tax chargeable.
The High Court found that the circumstances of a second claimant (Dr Ranjit-Singh) who had sought to set off part of her partnership losses against her income in the year of assessment were not relevantly different. The amendment to her claim to reduce the claimed partnership losses also led to an obligation upon her to repay that part of the provisional repayment of tax which had become excessive.
Timothy Brennan QC and Christopher Stone appeared for HMRC
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