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Supreme Court judgement 14th May – HMRC v Tooth

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Supreme Court judgement 14th May – HMRC v Tooth


Postby stewamax » May 18th, 2021, 3:20 pm

If taxpayer was unable to file an SATR correctly using an HMRC-approved package because of a system deficiency and instead inserted the potentially taxable amount in an adjacent box on the form with a note explaining what they had done and why, taxpayer had not made a ‘deliberate inaccuracy’ – in fact no inaccuracy of any kind – as there had been no intention to mislead HMRC. The taxpayer had done his best*.

HMRC said that it was stated on the package form that the submitted SATR would be processed by a computer and that taxpayers should know that, unlike tax inspectors, computers could not process the contents of a ‘box’ while taking into account a related text explanation. In other words, each box was an ‘island’ and its context was irrelevant.

The Court held that this was wrong: that a document – and a SATR was one such – could not have a different meaning depending on whether it was read by a human or a computer. HMRC could not have its cake and eat it: HMRC was including free-form comment boxes so that taxpayers could make the fullest and most accurate submission but then was ignoring such comments because their computer couldn’t make sense of them. (Note that the judgement covered a bit more than just this issue.)

This judgement is salient, especially to those whose claimed allowances, notably top-slicing relief, defeat HMRC’s test pack and hence third-party packages because of the differing interpretations of tax regulations. See for example the saga of Absolute Accounting Software’s Tim Good vs HMRC.
I have several times needed to insert taxable amounts (plus an explanation) where the package reflected HMRC's 'specials and exclusions'.

* given that approved packages cannot be modified unless HMRC issues a revised test pack

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