Introduction

Raftopoulou v. Revenue & Customs ([2016] STC 656) is a pivotal case adjudicated by the Upper Tribunal (Tax and Chancery Chamber). The case revolves around Dr. Vasiliki Raftopoulou's appeal against the First-tier Tribunal's (FTT) decision to strike out her claim for the repayment of overpaid income tax for the 2006-07 tax year. The crux of the dispute centered on whether the deeming provision in Section 118(2) of the Taxes Management Act 1970 (TMA) could be applied to deem an out-of-time claim for repayment as having been made within the statutory time limit, contingent upon the taxpayer having a reasonable excuse for the delay.

Summary of the Judgment

Dr. Raftopoulou filed a claim on October 13, 2011, seeking repayment of overpaid income tax for the 2006-07 tax year. HM Revenue & Customs (HMRC) contended that the claim was filed beyond the statutory four-year time limit stipulated under Schedule 1AB TMA. Consequently, the FTT struck out her claim, citing a lack of jurisdiction due to the absence of any statutory provision allowing an extension of the time limit.

Upon appealing, the Upper Tribunal examined whether Section 118(2) TMA could be interpreted to allow the late claim to be treated as timely if Dr. Raftopoulou had a reasonable excuse for the delay. The Upper Tribunal concluded that Section 118(2) indeed applies to Schedule 1AB claims, thereby deeming the late claim as submitted within the appropriate time frame, provided that a reasonable excuse can be established. Consequently, the Upper Tribunal allowed the appeal, set aside the FTT's decision, and remitted the case back to the FTT for reconsideration in light of this interpretation.

Analysis

Precedents Cited

The judgment extensively referenced several key cases that influenced the legal reasoning:

• Portland Gas Storage Limited v. Revenue and Customs Commissioners [2014] UKUT 329 (TCC): This case examined the scope of the FTT's jurisdiction concerning the opening and closing of enquiries.
• Robert Ames v. Revenue and Customs Commissioners [2015] UKFTT 0337 (TC): A critical case that initially concluded that Section 118(2) TMA does not apply to voluntary claims, a position subsequently reconsidered in the Raftopoulou case.
• Orakpo v. Lane [1996] STC (SCD) 43: Addressed the interplay between general and specific statutory provisions regarding time limits.

These precedents collectively addressed the interpretation and application of Section 118(2) TMA, particularly regarding its scope in extending statutory time limits for claims.

Legal Reasoning

The Upper Tribunal undertook a detailed statutory interpretation of Section 118(2) TMA. The provision states:

"For the purposes of this Act, a person shall be deemed not to have failed to do anything required to be done within a limited time if he did it within such further time, if any, as the Board or the tribunal or officer concerned may have allowed; and where a person had a reasonable excuse for not doing anything required to be done he shall be deemed not to have failed to do it unless the excuse ceased and, after the excuse ceased, he shall be deemed not to have failed to do it if he did it without unreasonable delay after the excuse had ceased."

The Tribunal analyzed whether making a claim under Schedule 1AB TMA is a "required act" within the meaning of the provision. Despite Schedule 1AB TMA being a voluntary act, the Tribunal held that adhering to the time limit is inherently required for the claim to be valid. Therefore, Section 118(2) can mitigate the failure to meet the time limit if a reasonable excuse is provided.

Additionally, the Tribunal addressed HMRC's argument that Section 118(2) should only apply to mandatory acts, not voluntary claims. By examining the legislative context and the purpose behind the provision, the Tribunal concluded that the essence of "required to be done" does not exclude voluntary acts like making a repayment claim, provided there is an imposed time limit essential for the claim's validity.

Impact

This judgment significantly impacts the landscape of tax claims in the UK by affirming that:

• Taxpayers who file late claims under Schedule 1AB TMA can still have their claims considered timely if they can demonstrate a reasonable excuse for the delay.
• The FTT must now consider the applicability of Section 118(2) TMA when determining the jurisdiction to hear late claims.
• HMRC's processes regarding enquiries and closure notices must align with this interpretation to ensure that late but excused claims maintain their viability for appeal.

Consequently, taxpayers have a reinforced avenue to challenge HMRC's stance on late claims, fostering a more equitable tax administration environment.

Complex Concepts Simplified

To enhance understanding, several complex legal terms and concepts from the judgment are clarified below:

• Section 118(2) TMA: A provision that allows taxpayers to be deemed not to have failed in their obligations if they act within an extended time frame granted by the authorities or if they had a reasonable excuse for delays.
• Schedule 1AB TMA: Governs claims for repayment of overpaid income tax, specifying that such claims must typically be made within four years of the relevant tax year.
• Closure Notice: A communication from HMRC concluding their enquiry into a claim, which can be appealed to the FTT if the taxpayer disagrees with the outcome.
• First-tier Tribunal (FTT): The initial tribunal that handles disputes between taxpayers and HMRC, including applications to strike out claims.
• Upper Tribunal (UT): The appellate body that reviews decisions made by the FTT, particularly concerning points of law.

Conclusion

The Raftopoulou v. Revenue & Customs judgment marks a significant development in the interpretation of tax claim procedures within the UK legal framework. By affirming that Section 118(2) TMA applies to Schedule 1AB reclamations, the Upper Tribunal has broadened the scope for taxpayers to challenge HMRC's enforcement of statutory time limits on repayment claims. This decision underscores the judiciary's role in ensuring fairness and accommodating reasonable circumstances that may impede timely submissions. Moving forward, both taxpayers and HMRC must navigate these provisions with a clearer understanding of the legal avenues available, fostering a more balanced and just tax dispute resolution mechanism.