InIgnatius Fessal v HMRC[2015] UKFTT 80 (17 February 2015), the FTT dismissed HMRC’s strike out application, on the ground that the taxpayer’s claim under the European Convention on Human Rights (ECHR) had a reasonable prospect of success.
Mr Fessal had moved to the ‘true and fair’ basis of organising profits for tax purposes (FA 1998 s 42). He had overpaid tax for 2006/07, but HMRC had rejected his claim for repayment on the ground that it was out of time (TMA 1970 Sch 1 AB). HMRC also raised discovery assessments in relation to underpayments for 2005/06 and 2007/08. Mr Fessal argued that his claim for repayment should be offset against those assessments.
The FTT first observed that, applying established case law (for example, HMRC v Abdul Noor [2013] UKUT 71), it had no jurisdiction to review HMRC’s refusal to exercise its discretion to allow a claim after the expiration of the time limit.
In response to Mr Fessal’s argument that he had a claim under ECHR (Protocol 1 article 1) and the Human Rights Act 1998, the FTT noted that he could only be successful if he had a claim for possession. His claim for repayment fell ‘marginally on the wrong side of the line’, as it was ‘an expectation of the exercise of an administrative discretion’ which could not be treated as a property right. Furthermore, the relevant time limits pursued a legitimate aim in a ‘reasonably proportionate manner’ in any event.
However, Mr Fessal’s claim against the discovery assessments was a claim for possession and the FTT considered that it was ‘at least arguably disproportionate’ for HMRC to collect tax for the 2005/06 period when it had already collected tax on those profits in relation to the 2006/07 year. This was particularly so, given that HMRC had issued the discovery assessments after the 2006/07 year had been closed. This put Mr Fessal in a worse position than a taxpayer who had not filed his return, effectively imposing a 100% penalty for declaring income in the wrong year.
Why it matters: Cases in which taxpayers successfully argue claim under ECHR are few and far between. This is therefore a very useful reference for any taxpayer or adviser wishing to make such a claim. The pivotal point here was that HMRC had effectively taxed the same profits twice. That said, the FTT also confirmed that ECHR cannot be invoked to force HMRC to exercise its discretion. It also remains to be seen whether the taxpayer will be successful in the substantive appeal.
InIgnatius Fessal v HMRC[2015] UKFTT 80 (17 February 2015), the FTT dismissed HMRC’s strike out application, on the ground that the taxpayer’s claim under the European Convention on Human Rights (ECHR) had a reasonable prospect of success.
Mr Fessal had moved to the ‘true and fair’ basis of organising profits for tax purposes (FA 1998 s 42). He had overpaid tax for 2006/07, but HMRC had rejected his claim for repayment on the ground that it was out of time (TMA 1970 Sch 1 AB). HMRC also raised discovery assessments in relation to underpayments for 2005/06 and 2007/08. Mr Fessal argued that his claim for repayment should be offset against those assessments.
The FTT first observed that, applying established case law (for example, HMRC v Abdul Noor [2013] UKUT 71), it had no jurisdiction to review HMRC’s refusal to exercise its discretion to allow a claim after the expiration of the time limit.
In response to Mr Fessal’s argument that he had a claim under ECHR (Protocol 1 article 1) and the Human Rights Act 1998, the FTT noted that he could only be successful if he had a claim for possession. His claim for repayment fell ‘marginally on the wrong side of the line’, as it was ‘an expectation of the exercise of an administrative discretion’ which could not be treated as a property right. Furthermore, the relevant time limits pursued a legitimate aim in a ‘reasonably proportionate manner’ in any event.
However, Mr Fessal’s claim against the discovery assessments was a claim for possession and the FTT considered that it was ‘at least arguably disproportionate’ for HMRC to collect tax for the 2005/06 period when it had already collected tax on those profits in relation to the 2006/07 year. This was particularly so, given that HMRC had issued the discovery assessments after the 2006/07 year had been closed. This put Mr Fessal in a worse position than a taxpayer who had not filed his return, effectively imposing a 100% penalty for declaring income in the wrong year.
Why it matters: Cases in which taxpayers successfully argue claim under ECHR are few and far between. This is therefore a very useful reference for any taxpayer or adviser wishing to make such a claim. The pivotal point here was that HMRC had effectively taxed the same profits twice. That said, the FTT also confirmed that ECHR cannot be invoked to force HMRC to exercise its discretion. It also remains to be seen whether the taxpayer will be successful in the substantive appeal.
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