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Finance Bill 2019: voluntary returns

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Following a number of cases which have considered the implications of voluntary tax returns (which are sometimes described as ‘unsolicited returns’) on, for example, enquiries, closure notices and penalties, HMRC has put forward a draft legislation in the Finance (No. 3) Bill (at clause 86) to codify the position.

HMRC’s policy has been to treat voluntary returns as if they were made pursuant to a notice to file under s 8 of TMA 1970 if four conditions were satisfied:

  • the return must have been intended by the taxpayer to be a return made and delivered pursuant to a notice under s 8;
  • HMRC must have accepted the return as such;
  • the taxpayer must not have objected to this treatment; and
  • there must have been no suggestion that the taxpayer had been compelled or coerced into filing the return.

So HMRC has always had a discretion to accept a voluntary return on the basis that it is then deemed to be made pursuant to a notice to file given under s 8.

Under the new provisions, this discretionary treatment is given a statutory basis. It applies where a taxpayer delivers a purported return under TMA 1970 ss 8, 8A or 12AA where no notice to file a return has been given under those sections. Importantly, however, HMRC still has discretion as to whether it will treat such a voluntary return as made and delivered pursuant to a notice given under the relevant section. It is not obliged, under the new legislation, to automatically accept such a return as being made and delivered pursuant to a statutory notice.

A voluntary return is one which has been delivered by a taxpayer who has not been given a notice to deliver a return under s 8, 8A or 12AA (in the case of an individual trustee or partnership), or has not been given a notice under FA 1998 Sch 18 para 3 (in respect of a company).

I cannot see these new provisions having a profound effect on such enquiry powers. The revised legislation does not change HMRC’s powers to enquire into a return. At the moment, for example, under TMA 1970 s 9A, an officer of the Board may enquire into a return ‘under section 8’. If, therefore, as the law currently stands, the taxpayer files a voluntary return which is not accepted by HMRC pursuant to the policy mentioned above, then no valid enquiry can be made into that return since the return was not made ‘under’ s 8. This means that any closure notice is invalid and, consequently, any appeal against a conclusion in that closure notice made under TMA 1970 s 31 is equally invalid.

If HMRC, under the new legislation, treat the voluntary return as made and delivered in pursuance of a statutory notice, then any such return will be deemed to have been made under the relevant statutory section and the forgoing issues regarding a closure notice and appeal rights fall away. But since HMRC will have a discretion as to whether or not to treat the notice as one made pursuant to a statutory notice to file, then there may not, in practice, be much difference when the new legislation comes into effect. If HMRC chooses not to treat a voluntary return as one made pursuant to a statutory notice, then a taxpayer’s rights will be to have that decision judicially reviewed, rather than bring it before the First-tier Tribunal.

The new provisions take effect from royal assent, but once royal assent has been granted, the amendments are treated as ‘always having been in force’.

But they do not apply to a voluntary return if, before 29 October 2018, the taxpayer has appealed against a consequence of that return and one ground of that appeal was that the return was a voluntary return. 

Issue: 1430
Categories: In brief