Updated: Jul 5, 2020
A claim for capital allowances needs to be made in a tax return for it to be valid and it is generally understood that this will normally follow the filing and amendment deadlines for income and corporation tax respectively (normally 12 months following the statutory filing date and you can read more details here).
But, what happens if the tax return is filed late (over 24 months from the period of account) and is subsequently challenged under enquiry. Well, that is exactly what happened in the case of Dundas Heritable Limited v The Commissioners for Her Majesty’s  UKFTT 0244(TC).
The taxpayer, an operator of public houses and bars, filed its tax return for the period ended 31 March 2012 on 3 February 2015 and, for the period ended 31 March 2013 on 26 November 2015. The tax returns included a claim for capital allowances of £317,535 and £369,207, which if you follow the normal time limits of filing and tax return amendment, were 10 months and 7 months late respectively
On 12 April 2016, HMRC opened an enquiry to reject the claims and the taxpayer appealed against the two closure notices. The enquiry was restricted to capital allowances and specifically the validity of the late claims made.
It was not disputed that the tax returns and claims for capital allowances were late. The issue in dispute was the technical application of paragraph 82 Schedule 18 Finance Act 1998 – “Time limit for claims” and Statement of Practise 5/01.
“A claim for capital allowances may be made, amended or withdrawn at any time up to whichever is the last of the following dates—
a) the first anniversary of the filing date for the company tax return of the claimant company for the accounting period for which the claim is made; b) if notice of enquiry is given into that return, 30 days after the enquiry is completed; c) if after such an enquiry [an officer of Revenue and Customs] [amends] the return under paragraph 34(2), 30 days after notice of the amendment is issued; d) if an appeal is brought against such an amendment, 30 days after the date on which the appeal is finally determined.”
HMRC argued that the claims were not made in time for the purposes of (a) above and were therefore invalid. They also argued that when the claims were finally made there was no open enquiry for the purposes of (b)-(d) above. The mere fact that an enquiry had to be opened to remove the late claims, in HMRC’s view, did not make the original claims valid.
After much technical debate, First-tier Tribunal found in favour of the taxpayer….
“The appeal is allowed. I therefore find that the claims to capital allowances for the periods ended 31 March 2012 and 31 March 2013 should be allowed on the basis that they have been made timeously by virtue of paragraph 82(1)(b) notwithstanding the claims were not made within the time limit contained in paragraph 82(1)(a).”
We would always advise adherence to statutory filing deadlines to avoid penalties, interest and higher risk ratings; however, if you find yourself filing a very late tax return, the above case could provide a useful reference to support an accompanying valid capital allowances claim.
If you would like more details, please do not hesitate to contact us.