It is normally straightforward to tell when HM Revenue and Customs (HMRC) have raised an assessment in respect of a taxpayer. However, what constitutes an ‘assessment’? This is an important question because assessments are generally subject to a right of appeal. But is there a right of appeal against an HMRC tax calculation notice?
Right of appeal?
In Clark v CRC  UKFTT 302 (TC), the taxpayer received a tax calculation notice (Form P800) from HMRC, indicating that tax had been under-collected for 2009-10, amounting to £806.60. The taxpayer appealed to the tribunal. HMRC said that the taxpayer had no right of appeal against a tax calculation notice, and asked the tribunal to strike out his appeal.
For a case to be struck out, it must be ‘plain and obvious’ that it will not succeed. However, the tribunal considered that the taxpayer may well have a right of appeal against the tax calculation notice, and dismissed HMRC’s application for the appeal to be struck out. The tribunal decided that the appeal raised ‘important and fundamental questions’ which needed more consideration, by way of a separate appeal hearing and/or a judicial review claim to the High Court.
The taxpayer had four sources of income within the scope of PAYE during 2009-10. He had contacted HMRC four or five times early in that tax year. HMRC issued the tax calculation notice in November 2010, showing the tax underpayment of £806.60. Upon receipt, the taxpayer called HMRC and was told that they had allowed him two personal tax allowances by mistake. The tribunal commented that the taxpayer had "tried very hard" to ensure that his income was correctly taxed before receipt.
HMRC stated that the calculation notice is an "informal assessment" and that there was no statutory right of appeal against it. However, the tribunal noted that (under TMA 1970, s 31(1)(d)) taxpayers have a right to appeal against "an assessment which is not a self-assessment", and that it was "clearly arguable" that the "informal calculation" is an assessment other than a self-assessment.
The tribunal concluded that it was not "plain and obvious" that Mr Clark had no right of appeal against the tax calculation notice. It was certainly arguable that a tax calculation notice was a notice of assessment, in which case there was a right of appeal. The tribunal refused HMRC's application to strike out the case, and directed that if the appeal could not be settled by agreement between the parties, it should be reclassified as a 'standard' case and listed for hearing before another tribunal.
The outcome of Mr Clark's case is not known at the time of writing. However, the tribunal's decision could have much wider implications for the many employees and pensioners who receive from HMRC a P800 tax calculation each year. In its guidance for taxpayers on the P800 form (www.hmrc.gov.uk/p800/index.htm), HMRC states: "If you don't agree with something included in your P800 Tax Calculation, contact HMRC...If HMRC agrees that your P800 Tax Calculation is incorrect they will amend it and send you a new one." However, this procedure presumably deals only with errors or omissions on the form itself.
With regard to errors by employers and pension providers which result in a tax underpayment, HMRC advises: "If you think your employer or pension provider has made a mistake - for example because they didn't take reasonable care to use the right tax code - they may be due to pay back the tax owed instead."
However, what about HMRC errors, which result in a tax underpayment?
As mentioned, in Mr Clark's case HMRC had given the benefit of two personal allowances. Extra-Statutory Concession A19 'Giving up tax where there are Revenue delays in using information ( ) provides that HMRC will "normally" give up tax arrears resulting from their failure to make "proper and timely" use of information. In Mr Clark's case, the tribunal Judge, Anne Redston, stated:
"In the instant case, HMRC were told by Mr Clark on four or five occasions, before the end of the 2009-10 fiscal year, about his retirement and his four different sources of income. Despite this, they gave him two personal allowances. I thus find that they “failed to make proper use” of the facts with which they had been provided, and thus that he would fall within the first of the two alternative ways for meeting the second “exceptional” part of the ESC."
However, it was also pointed out that there is no right of appeal against HMRC's refusal to apply an Extra Statutory Concession.
ESC A19 has limitations in its application, because it is subject to conditions.
The facility to appeal against P800 notices would constitute a helpful and reassuring safeguard for taxpayers such as Mr Clark.
This article is accredited to Mark McLaughlin for the ICPA
Mark McLaughlin CTA (Fellow) ATT TEP