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Legal Terms - mistake or error (in tax law)
As long as the Revenue hasn't sent out a notice that it is looking into the return, a taxpayer may, at any time up to 12 months from the date the return was filed, change a figure they unintentionally included on their personal tax return without providing an explanation (Taxes Management Act 1970 § 9ZA). For all other taxes, there are comparable provisions for returns. An "error or mistake" claim for restitution of the overpaid tax may be filed under the Tax Management Act 1970 sch 1AB if the taxpayer made a mistake on the tax return that resulted in an overpayment of tax. This claim needs to be submitted within four years of the tax year in question ending. The First-tier Tax Tribunal has the authority to extend the deadlines in these two clauses. In evaluating such an extension, the Tribunal must follow the guidelines outlined in William Martland v. HMRC [2018] UKUT 178 (TCC). According to this clause, a return input that turns out to be inaccurate later on is not considered a "mistake." In British Mexican Petroleum Co Ltd v. Jackson [1932] UKHL TC 16, the creditor waived a portion of the taxpayer company's substantial liability that had been accrued in year one.
According to the House of Lords, the release could not change the liability entered for the first year. STC 195 phased payments to architects in Symons v. Weeks [1983] included a sizeable portion of payment in advance, but the precise total cost could not be determined until the work was finished. Change was not allowed. Likewise, if the return was made in compliance with "prevailing practice" (TMA 1970 sch 1AB para 2(8)), even if that practice is later found to be incorrect, it is not a mistake. In contrast to the statute, rents were included in trading income in Carrimore Six Wheelers Ltd v. IRC [1944] 2 All ER 503.
There was no way to fix this. On a legal matter, the Revenue modified its interpretation in Arranmore Investment Co Ltd v. IRC [1973] TR 151, NI CA. The Court of Appeal denied the company's claim of error or mistake, stating that the "prevailing practice" under which the earnings were initially remitted was the prior interpretation of the law. In Monro v. R & C Comrs [2008] EWCA Civ 306, Mr. Monro included the profit he received from exercising an employee share option in his 1999/2000 tax return. He calculated the gain by deducting the price he paid from the £7,386,955 in sale profits. In Mansworth v. Jelley [2002] EWCA Civ 1829, the Court of Appeal declared that such a computation is unlawful after he filed his tax return. The market value, not the purchase price, should be the expense that is subtracted. As a result of this ruling, Mr. Munro paid £846,000 more in taxes than he was legally required to. HMRC declined to reimburse the excess tax. He made a plea. The court denied the tax repayment claim because, in 1999–2000, it was customary to deduct base costs rather than market values, which was later determined to be the proper method. In Lipman Gorman v. Karpnalel Ltd [1991] 2 AC 548, Lord Gough succinctly outlined the common law remedy of *restitution, which can be used as an alternative to the statutory claim. Deutsche Morgan v. IRC [2007] STC 1 (HL) and Campbell v. Hall (1774) 1 Cowp 204 both filed a claim for tax recovery under the law of restitution. *Sometimes a taxpayer's error can be fixed by the Court through rectification. In Toronto-Dominion Bank v. Oberoi & Others [2004] STC 1197, a foreign bank agreed to pay £345,000 in rent for a 22-month lease on a home for one of its senior staff members. The Court drastically reduced the *benefit in kind charged to the employee by renaming the £345k as "premium" instead of "rent."
As long as the Revenue hasn't sent out a notice that it is looking into the return, a taxpayer may, at any time up to 12 months from the date the return was filed, change a figure they unintentionally included on their personal tax return without providing an explanation (Taxes Management Act 1970 § 9ZA). For all other taxes, there are comparable provisions for returns. An "error or mistake" claim for restitution of the overpaid tax may be filed under the Tax Management Act 1970 sch 1AB if the taxpayer made a mistake on the tax return that resulted in an overpayment of tax. This claim needs to be submitted within four years of the tax year in question ending. The First-tier Tax Tribunal has the authority to extend the deadlines in these two clauses. In evaluating such an extension, the Tribunal must follow the guidelines outlined in William Martland v. HMRC [2018] UKUT 178 (TCC). According to this clause, a return input that turns out to be inaccurate later on is not considered a "mistake." In British Mexican Petroleum Co Ltd v. Jackson [1932] UKHL TC 16, the creditor waived a portion of the taxpayer company's substantial liability that had been accrued in year one.
According to the House of Lords, the release could not change the liability entered for the first year. STC 195 phased payments to architects in Symons v. Weeks [1983] included a sizeable portion of payment in advance, but the precise total cost could not be determined until the work was finished. Change was not allowed. Likewise, if the return was made in compliance with "prevailing practice" (TMA 1970 sch 1AB para 2(8)), even if that practice is later found to be incorrect, it is not a mistake. In contrast to the statute, rents were included in trading income in Carrimore Six Wheelers Ltd v. IRC [1944] 2 All ER 503.
There was no way to fix this. On a legal matter, the Revenue modified its interpretation in Arranmore Investment Co Ltd v. IRC [1973] TR 151, NI CA. The Court of Appeal denied the company's claim of error or mistake, stating that the "prevailing practice" under which the earnings were initially remitted was the prior interpretation of the law. In Monro v. R & C Comrs [2008] EWCA Civ 306, Mr. Monro included the profit he received from exercising an employee share option in his 1999/2000 tax return. He calculated the gain by deducting the price he paid from the £7,386,955 in sale profits. In Mansworth v. Jelley [2002] EWCA Civ 1829, the Court of Appeal declared that such a computation is unlawful after he filed his tax return. The market value, not the purchase price, should be the expense that is subtracted. As a result of this ruling, Mr. Munro paid £846,000 more in taxes than he was legally required to. HMRC declined to reimburse the excess tax. He made a plea. The court denied the tax repayment claim because, in 1999–2000, it was customary to deduct base costs rather than market values, which was later determined to be the proper method. In Lipman Gorman v. Karpnalel Ltd [1991] 2 AC 548, Lord Gough succinctly outlined the common law remedy of *restitution, which can be used as an alternative to the statutory claim. Deutsche Morgan v. IRC [2007] STC 1 (HL) and Campbell v. Hall (1774) 1 Cowp 204 both filed a claim for tax recovery under the law of restitution. *Sometimes a taxpayer's error can be fixed by the Court through rectification. In Toronto-Dominion Bank v. Oberoi & Others [2004] STC 1197, a foreign bank agreed to pay £345,000 in rent for a 22-month lease on a home for one of its senior staff members. The Court drastically reduced the *benefit in kind charged to the employee by renaming the £345k as "premium" instead of "rent."
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