BUREAU WORKSPACE LTD AGAINST ADVOCATE GENERAL FOR THE COMMISSIONERS OF HMRC [2024] ScotCS CSOH

OUTER HOUSE, COURT OF SESSION

[2024] CSOH 1

P427/23

OPINION OF LORD ERICHT

In the petition

BUREAU WORKSPACE LIMITED

Petitioner

against

ADVOCATE GENERAL FOR THE COMMISSIONERS OF HMRC

Respondent

Petitioner: Simpson KC; Addleshaw Goddard

Respondent: Roxburgh; Office of the Advocate General

11 January 2024

Introduction

[1]

Agents acting for a taxpayer sought to claim Research and Development Credit.

Prior to the deadline for making the claim, they filed a return but did not file an

accompanying corporation tax computation. The computation was not lodged until 20 days

after the deadline. HMRC advised that it would not allow a late claim. The taxpayer

brought judicial review proceedings seeking reduction of that refusal on two grounds. The

first ground was that in refusing to process the claim because the claim was not

accompanied by a corporation tax computation, HMRC had erred in law. The second

ground was that, if there was no such error of law, the refusal was Wednesbury unreasonable.

The facts

[2]

The Petitioner appointed Messrs Anderson Anderson Brown (the "Agents") as its

corporation tax advisors for the accounting period 1 January to 31 December 2020 ("AP20").

The Agents identified that the Petitioner was entitled to a Research and Development

Expenditure Credit under section 1044 of the Corporation Tax Act 2009 ("RDEC") in relation

to AP20. The Agents then investigated the previous accounting period, AP19, and

ascertained that the Petitioner was also entitled to an RDEC for AP19 in the amount

of £349,346. As no claim for the RDEC for AP19 had been made in the Petitioner's

corporation tax return for AD19, the only means by which a claim for RDEC could be made

was by amending that return (Finance Act 1988, schedule 18, para 83B). The deadline for

such amendment was 31 December 2021.

[3]

The Agents' office was closing for the Christmas break on 23 December 2021. On

that day the Agents filed online the return and corporation tax computation for AP20.

At 18.32h that day they tried to file online the amended return and computation for AP19

but this was not successful. Instead, at some point after 19.05h, Agents filed online the

amended return for AP19 without the accompanying corporation tax computation, and did

not submit the computation by email. The Agents' office was closed from 23 December until

4 January 2022 for the Christmas and New Year period. The deadline for filing the claim

elapsed within the time when the office was closed.

[4]

On 4 January 2022, the Agents contacted the HMRC by telephone to ascertain

whether the claim was being processed, and was advised that the claim was not yet being

processed and would be processed by 23 February 2022.

[5]

On 13 January 2022, HMRC wrote to the Petitioner in the following terms (emphasis

added):

"Thank you for sending us your Research and Development (R&D) claim dated

31 December 2019 for the above company.

This is for the accounting period from 1 January 2019 to 31 December 2019.

We are unable to deal with your R&D claim. This is because it is an incorrect format

and is incomplete. The format does not meet the conditions set out in Schedule 18 of

the Finance Act 1998 (paragraph 15 (2) and (3)).

What you need to do now

We need more information from you so we can deal with your R&D claim.

When you send us your R&D claim, you must include:

your Corporation Tax return completed correctly and in full for all the

relevant boxes (including the signature declaration box)

computations for the relevant accounting period

accounts for the relevant accounting period

attach CT600L (2021) version 3

These requirements have been in place since 1 April 2019.

However, since 6 April 2021 we have introduced the CT600L supplementary page for

R&D claims. This provides an additional breakdown to an R&D claim.

.....

Please submit computations to support 2019 claim I have processed and

refunded 2020 today

You must send us the required information in the correct format so that we can deal

with the claim.

...

Information for future claims

When you send us a Corporation Tax return that includes a claim for R&D, we also

need all the correct information to support the claim. The information and the return

must be for the same year. You can use the online service to send us this

information.

We cannot accept a Corporation Tax return form on its own.

Please note that an amended return with an R&D claim must be sent to us within

the time limit. The time limit for this is set out in Schedule 18 of the Finance

Act 1998 (paragraph 83E (2)).

A claim for R&D relief can be made up to 2 years after the end of the accounting

period it relates to.

If your R&D claim is for a period of 12 months or more, you should submit a

separate claim for each accounting period. You should do this using a Corporation

Tax return."

[6]

On 19 January 2022, the Agents telephoned HMRC's general corporation tax

helpline, which was not able to state whether the claim would be validly made if the

corporation tax return were re-submitted. On 20 January 2022, the Agents emailed HMRC

as follows:

"Following the re-submission of the above-named company's computation with

related R&D claim for the 31 December 2019 year end, we received a letter dated

13th January 2022 explaining that we needed to provide further information. We

understand that the computation was missing from the amended submission, for

completeness please see attached the following documents to support the R&D

claim:

Corporation Tax Return with CT600L

Corporate Tax Computation

Accounts for the period ending 31 December 2019

R&D report

I should be grateful if you could please confirm receipt of the attached documents

and for the 2019 claim to be updated."

[7]

By letter dated 10 February 2022, HMRC wrote to the Agents as follows:

"I write regarding your email dated 20 January 2022 concerning your client's R&D

claim for the period ended 31 December 2019.

The time limit for submitting a claim mirrors the time-limit for submitting a

corporation tax return, i.e. a return/claim should be submitted within 12 months

following the accounting period end and any amendment to that return should be

submitted within 12 months following that date, i.e. for an account period ended

31 December 2019 a return should be submitted on or before 31 December 2020 and

any amendment on or before 31 December 2021.

I must therefore advise you that this submission is `out of time'. In exceptional

circumstances submissions made out of time may be accepted but only where these

circumstances fit the criteria as described in SP5/01. I would refer you to the

attached copy and in particular paragraphs 9-13.

Please note that although SP5/01 does not expressly mention R&D claims, such

claims are subject to the same time restraints.

At this stage, a decision has not yet been made about whether the claim can be

accepted, or not. If you feel that the reasons for the late submission meet the

requirements, please write to me at the address above by 11 April 2022 stating that

the claim is being made under the provisions of SP5/01 and giving the reasons for the

delay...."

[8]

HMRC's statement of Practice 5 (2001) (SP5/01) was attached to that letter. SP5/01

sets out HMRC's approach to late claims as follows:

"The Commissioners for HMRC's approach to extending time limits for making

claims

The time limits allowed for making claims to loss relief, capital allowances

and group relief under CTSA and the further provisions described above should

generally be adequate and the Commissioners for HMRC will not make routine use

of their powers to accept claims made outside these limits. But the Commissioners

for HMRC recognise that there may be exceptional reasons why a claim is not made

within the time specified. Applications to allow further time in accordance with the

powers referred to at paragraph 1 above will be considered with the assistance of the

following criteria.

10.

In general, the Commissioners for HMRC's approach will be to admit claims

which could not have been made within the statutory time limits for reasons beyond

the company's control. This would include, for example, cases where:

at the date of the expiry of the time limit, the company or its agents

were unaware of profits against which the company could claim relief

the amount of a profit or loss depended on discussions with an

Inspector which were not complete when the time limit expired, and

the delay in agreeing figures is not substantially the fault of the

company or its agents.

In such cases the Commissioners for HMRC's approach will be to admit late claims

up to the amount of the profit or loss in question. Where the claim involves the

withdrawal of an existing claim and the making of a fresh claim, the Commissioners

for HMRC's approach will be to admit these to the extent of the profit or loss in

question. Claims which go beyond this and affect profits which were not in dispute

at the time of expiry of the statutory time limits will not be within this approach.

Reasons beyond the company's control would also include a claim where all of the

following 4 features were present:

an officer of the company was ill or otherwise absent for a good

reason

the absence or illness arose at a critical time and prevented the making

of a claim within the normal time limit

there was good reason why the claim was not made before the time of

the absence or illness

there was no other person who could have made the claim on the

company's behalf within the normal time limit.

11.

The Commissioners for HMRC would not, however, regard the following as

reasons beyond the company's control:

oversight or negligence on the part of a claimant company or its agent

failure, without good reason, to compute the necessary figure *the

wish to avoid commitment pending clarification of the effects of

making a claim

illness or absence of an agent or adviser to the company

12.

There may be cases falling outside the general approach outlined in

paragraph 10 where it would nevertheless be unreasonable, given the overall

circumstances of the case, for the Commissioners for HMRC to refuse a late claim. It

is likely that such cases will involve a combination of factors, but the following

criteria may be relevant:

the reason why a claim is late - where the reason does not in itself

warrant admission of the claim under the approach outlined above, it

will still be taken into account by the Commissioners for HMRC in

assessing the circumstances as a whole

the extent to which it is late

the consequences for the company if the claim is refused

any particularly unusual features

For the purpose of this paragraph and those above, if the late claim forms part of a

scheme or arrangement, the main purpose or one of the main purposes of which is

the avoidance of tax (including the payment of tax), then that will be taken into

account in the Commissioners for HMRC's approach."

[9]

On 3 March (the "Request Letter"), the Agents requested HMRC to process the AP19

claim as follows:

"We are writing in response to your recent correspondence on our above client

received on 10 February 2022. Our email dated 20 January was a response to your

original correspondence on 13 January 2022, all attached for reference.

An amended Corporation Tax return (CT600 and CT600L) was submitted for the

above named client for the accounting period 1 January 2019 to 31 December 2019

which included the R&D claim, this amended return was submitted to HMRC on

23 December 2021. Our normal procedure is to attach a copy of the computation

with the claim however we were having an issue with our CT software at that time.

We were keen to get the claim in so submitted the amended return and R&D report.

Following your original letter on 13 January 2022 in relation to our above named

clients R&D claim for the accounting period 1 January 2019 to 31 December 2019,

requesting for the computation required to support the R&D claim, we responded on

20 January 2022 with the requested computation via email, I have attached for

reference. We were under the impression that when the additional information was

provided to HMRC the amendment would be processed, there was no mention of a

claim being out of time in your original letter of 13 January. It was not until we then

received your letter on 10 February 2022 stating that the claim for R&D was outwith

the time-limit for a claim.

Our amended return was made on 23 December 2021 and therefore within the time

limit of 31 December 2021. We understood from the letter on 13 January 2022 that

the computations were not attached to the amended submission and, from your

letter on 13 January 2022, that we were to `submit computations to support 2019

claim' which we understood would allow the R&D claim to be processed.

Furthermore, as the 31 December 2019 return was an amended return, the

computations had previously been submitted on original submission, excluding the

R&D claim that was included on the amended Corporation Tax return with CT600L.

I would be grateful if you could please process the R&D claim for the 31 December

2019 period now that we have provided the computations to support the R&D claim

made on 23 December 2021, as requested in your letter on 13 January 2022."

[10]

The Agents sent a further letter to HMRC dated 8 July setting out their point of view

and including the following:

"SUBMISSION ISSUES

.. there were technical issues with Alphatax and/or the HMRC portal when

we initially tried to submit the amended 31st December 2019 Corporation Tax

return with the inclusion of the computation.

We have attached the EFiling report which shows the audit trail of the

submission and documents attached on the filing request. This shows the

"failed" submission which refers to the HMRC website that is no longer

available. We understood on the 23rd December 2021 that this related to the

computation being attached on the submission and HMRC would reject this

submission because of the attached computation.

With HMRC, Alphatax and our offices being closed for most of the days over

the Christmas period up to the 31st December 2021, we submitted the

Corporation Tax return without the computation to ensure that the R&D

claim was made prior to the 31st December 2021 deadline. This was

successful on 23rd December 2021 as seen from the EFiling report attached.

Just to emphasise that the 31st December 2019 was an amended return and

the computation had already been submitted, albeit without the R&D figures

and other amendments made in the amended Corporation Tax return.

...

We replied to [HMRC's letter of 10 February] on 3rd March 2022, as attached,

stating the Alphatax/HMRC technical issue and reference to the original 13th

January 2022 letter, referring to the request for the computation to be

provided in order to process the 2019 R&D claim.

CLIENT IMPACT

In addition to the submission issues, we would like to emphasise the reliance

that [the Petitioner has] on the R&D repayments and claims.

The shareholders of [the Petitioner] had acquired the business from an

insolvent group "Houseology Design Group Limited" who were in liquation

at the time. A significant investment was required into [the Petitioner] to turn

the business around with the R&D claims being large factor in keeping [the

Petitioner] trading.

Based on the evidence provided, we consider that all relevant information

was provided in time when requested following the submission issues. We

therefore consider that the 31st December 2019 claim should be processed and

removed from the Out of Time/Late Claims."

[11]

By letter dated 23 February 2023, (the "Decision Letter") HMRC advised the

Petitioner that HMRC would not use its powers under paragraph 83A (2) Schedule 18

FA 1998 to allow the late claim for the period ending 31 December 2019. The time limit for

R&D claims was at para 83E(1) Schedule 18FA 98. The only recourse where time limits had

expired was para 83E(2) and the provisions of SP05/01. The letter summarised the relevant

paragraphs SP05/01 and then continued:

"Application of SP 05/01

For the purposes of the Taxes Acts it is the responsibility of the Company to

ensure that it makes its appropriate claims at the correct time and only

exceptional cases for lateness can be admitted under SP 05/01.

It was always within the Company's control to make the R&D claim and the

Company has managed to fulfil its other statutory requirements at the correct

time. In coming to my decision, I have considered that the statute on R&D

claims is clear and that the legislation has been in place for many years.

Furthermore, it has attracted wide publicity within many professional fields

and within the accountancy profession.

The timeframe is given by Parliament, and it has proved long enough for

other companies. HMRC has to exercise its administrative discretion in a fair

and equitable way. Fair treatment must include dealing with all taxpayers

equitably.

Paragraphs 9 to 11

Paragraphs 9 & 10 of SP5/01 explain that, while HMRC recognises there may be

exceptional reasons why a claim is not made within the statutory time limit, it will

not make routine use of its power to allow claims made outside the statutory time

limits. In general, HMRC's approach will be to admit claims which could not have

been made within the time limits due to circumstances beyond the company's

control. Paragraph 11 of SP5/01 makes it clear that HMRC will not consider

oversight or negligence on the part of the company of agent to be something beyond

the company's control.

You have suggested that the claim was not late. This is incorrect. The time limit for

making the claim is the anniversary of the statutory filing date for the return in

which the claim is made. In this case that was 31 December 2021. Any claim

received after that date is late. The amendment made to the return on 23 December

2021 did not make a valid claim for relief, due to the absence of computations, and

the claim received on 20 January 2022 was late.

Since 1 April 2019 there is a requirement that any claim for R&D relief, payable tax

credit or RDEC made in an amendment to a return must be accompanied by

completed CT600 and computations. This was notified to agents in Agent Update 70,

published on 21 February 2019.

You appear to be under the misapprehension that, because computations had been

delivered with the company's original return, the requirement had been met. This is

incorrect.

First, the requirement is to provide the computation with the claim not at some point

in the past.

Second, R&D relief is an additional deduction in calculating a company's trade profit

chargeable to tax and making a claim reduces the company's profit or increases a

loss. By definition, if the company intended to claim R&D relief in an amendment to

the return, the original computations were incorrect. There would be little point in

HMRC requiring computations if they did not reflect the claim.

You have pointed to HMRC's initial correspondence failing to point out that the

claim was late. In fact, when HMRC wrote to the company on 13 January 2022 there

was no late claim. The amendment received on 23 December 2021 did not make a

claim. When you provided the correct documentation to make a claim on 20 January

2022 that claim was late.

You have claimed that you were unable to attach computations to the amendment

for this period on 23 December 2021 due to issues with your software, Alphatax.

However, you were able to deliver the same company's return for the following

period with a computation on 23 December 2021. Without further explanation it is

difficult to see how this occurred.

However, even if HMRC accepts that software issues prevented the delivery of

computations, the fact remains that you failed to take any action to rectify the

situation until contacted by HMRC.

It was the responsibility of the officers of the company and their advisers to be aware

of the correct procedure for making a claim and to follow it. They failed to do so

and, further, having failed to provide a computation took no action to rectify the

situation until contacted by HMRC.

The claim was not delayed by any circumstances beyond the company's control. It is

more likely that the cause was oversight or negligence on the part of the company or

its authorised representatives in failing to take steps to deliver the computations

before 31 December 2021 despite knowing that they had not been provided.

Paragraph 12

The public body must give attention to the particular circumstances taking account

of all relevant considerations and not taking account of any irrelevant consideration

in order to reach a rational and reasonable decision; that is a decision not so

unreasonable that no reasonable person properly directing themselves could have

taken it.

The reason the claim was late has been considered above.

In particular, Para 12 mentions 4 specific points to consider amongst other things,

these being:

The reason the claim is late.

The degree of lateness.

The consequences of refusal.

Any unusual features.

The claim was twenty days late. While this may not be considered an excessive

delay, you were fully aware that they had failed to provide computations and took

no action until contacted by HMRC.

A review of the most recent financial statements provides no reason to believe that

rejection of the claim will materially affect the long-term viability of the company.

There are no other unusual circumstances.

Nothing beyond the company's control prevented the claim being delivered with the

time limits."

Statutory provisions

[12]

Schedule 18 to the Finance Act 1998 includes the following paragraphs:

"15.

(1)

A company may amend its company tax return by notice to an officer of

Revenue and Customs.

(2)

The notice must be in such form as an officer of Revenue and Customs may

require.

(3)

The notice must contain such information and be accompanied by such

statements as the Inland Revenue may reasonably require.

(4)

Except as otherwise provided, an amendment may not be made more than

twelve months after-

(a)

the filing date, or

(b)

in the case of a return for the wrong period, what would be the filing

date if the period for which the return was made were an accounting period.

...

83B. Claim to be included in company tax return

(1)

A claim [for RDECs] must be made by being included in the claimant

company's company tax return for the accounting period for which the claim is

made.

(2)

It may be included in the return originally made or by amendment.

83C.

Content of claim

A claim [for RDECs] must specify the amount of the credit or relief claimed, which

must be an amount quantified at the time the claim is made.

83D. Amendment or withdrawal of claim

A claim [for RDECs] may be amended or withdrawn by the claimant company only

by amending its company tax return.

83E.

(1)

.... a claim [for RDECs] may be made....at any time up to the last day of the

period of

(a)

two years beginning with the last day of the period of account....,

(5) A claim [for RDECs] may be made, amended or withdrawn after the end of the

period mentioned in sub-paragraph (1)... if an officer of Revenue and Customs

allows it."

HMRC publications

HMRC Agent Update Issue 70

[13]

HMRC Agent Update Issue 70 February-March 2019 (Update 70) states:

"Claims for Research and Development reliefs or Creatives Tax Reliefs which

form a part of an amended return

From 1 April 2019 all claims for research and Development reliefs ....which form a

part of an amended return must include a completed CT600 and a Corporation Tax

computation.

Those items can be included as enclosures to an email. Potential claims without both

the completed CT600 and computations will be returned.

...

The changes do not affect amendments which are made electronically.

When the new rules commence details will be included in pages of the Corporate

Intangibles Research and Development Manual (CIRD81800 and CIRD89705) and in

the Company Taxation Manual on GOV.UK."

HMRC Corporate Intangibles Research and Development Manual CIRD81800

[14]

HMRC manual CIRD81800 Claims and Time Limits states (emphasis added):

"R&D tax reliefs are not a mandatory adjustment to the profit of an accounting

period. A claim must be made for the extra deduction.

...

Claims made in an amendment to a Corporation Tax Self Assessment (CTSA)

Return

From 1 April 2019 all R&D claims which are made in an amendment to a return need

to include a completed CT600 and a corporation tax computation.

Most amendments to a return are made through the Corporation Tax Online Service

... and already include a completed CT600 and a corporation tax computation. Those

claims are not affected by this change. However, where the corporation Tax Online

Service is used to make an amendment to a return but a company does not include

both a completed CT600 and a corporation tax computation no valid claim will

have been made until both documents have been received. Any missing

document can be included as an enclosure to an email.

...

Late claims

Where there is a late claim it should be dealt with in accordance with the guidance at

Statement of Practice SP05/01. While this does not specifically refer to R&D payable

tax credits, the approach is a general one that HMRC adopt.

HMRC Corporate Intangibles Research and Development Manual CIRD89705

[15]

CIRD 89705 R&D Tax Reliefs: Overview states (emphasis added):

"From 1 April 2019 all R&D claims which are made in an amendment to a return

need to include a completed CT600 and a corporation tax computation.

Most amendments to a return are made through the Corporation Tax Online Service

... and already include a completed CT600 and a corporation tax computation. Those

claims are not affected by this change. However, where the corporation Tax Online

Service is used to make an amendment to a return but a company does not include

both a completed CT600 and a corporation tax computation no valid claim will

have been made until both documents have been received. Any missing

document can be included as an enclosure to an email."

HMRC Company Taxation Manual CTM93300

[16]

HMRC Company Taxation Manual CTM93300 CTSA: Amended Returns states

(emphasis added):

"Under FA/SCH18/PARA15 a company can amend information originally entered in

its return and make corresponding amendments to its SA...

...

Currently, HMRC does not propose to prescribe the form and content of an amended

return, or to provide an official form for amended returns.

Instead, companies and their agents can amend company tax returns informally, in

correspondence.

The only exception to this is if the amendment to the return involves Research and

development reliefs.... Details about the form and content required for these

reliefs are in the R&D Manual (CIRD81800) ....."

First Ground: Error in law

Submissions for the Petitioner

[17]

Counsel for the Petitioner submitted that no requirement that the corporation tax

computation be filed at the same time as the amended return had been imposed in terms of

paragraph 15 of schedule 18 of the Finance Act 1998. HMRC manuals do not purport to be

the means by which any officer imposes a requirement under para 15(2) of Schedule 18 to

the Finance Act 1998. In any event, the manuals do not make clear that where an

amendment is made by corporation tax return by electronic means the amendment must

include or be accompanied by a corporation tax computation. Agent Update 70 described

itself as concerning changes that do not effect amendments which are made electronically.

[18]

In refusing to process the claim on the ground that a corporation tax computation

was not included with the amended corporation tax return, HMRC erred in law, because

where an amended return is submitted electronically, neither HMRC nor any of its officers

have required that a corporation tax computation must be included in or accompany it.

Submissions for HMRC

[19]

Counsel for HMRC submitted that it was clear from the opening line of CIRD81800

that all RDTC claims that are made in an amendment to a return must include both the

CD600 and a corporation tax computation. As a matter of plain language, that included all

claims whether made on the online portal or not. The matter was put beyond doubt in the

second section which stated that no valid claim would have to be made until both

documents had been received.

Analysis and decision

[20]

A claim for RDEC must be made by being included in the claimant company's tax

return for the accounting period for with the claim is made, either in the original return or

by amendment (para 83B of Schedule 18 to the Finance Act 1998). The deadline for

submitting an amended claim is two years (para 83E). A company may amend its tax return

by notice to HMRC in such form as an officer of HMRC may require, and must contain such

information and be accompanied by such statements as HMRC may reasonably require

(para 15)

[21]

In this case, the deadline for the submission of an amended claim by the Petitioner

was 31 December 2021. The Petitioner's position is that the submission of the amended

return without a corporation tax computation on 23 December 2021 constituted a valid

claim, and therefore the claim had been submitted before the deadline and should have been

considered. HMRC's position is that the submission of the amended return without the

corporation tax computation was not a valid claim, and therefore the claim had not been

submitted before the deadline.

[22]

This issue turns on whether there was a requirement on the taxpayer to include the

computation with the amended return. There is no doubt that HMRC has the power to

impose such a requirement: a notice amending a return must be in such form as an officer of

HMRC may require and must contain such information and be accompanied by such

statements as HMRC may reasonably require (para 15 (2) and (3), schedule 18, Finance Act

1998).

[23]

In my opinion, there was such a requirement. There is no formal mechanism set out

in the legislation with which HMRC must comply in order to impose requirements under

para 15(2) or (3). HMRC has set out its requirements in the HMRC Manual CTM 93300 and

CIRD 81800 and 89705 and communicated its requirements to agents in Agent Update 70.

Although HMRC Manuals contain guidance for HMRC staff, they are published and

constitute a public record of the requirements which HMRC has imposed under para 15(2)

and (3).

[24]

CTM93300 makes it clear that although HMRC does not normally prescribe the form

and content of an amended return, it does so if the amendment involves Research and

Development.

[25]

HMRC sets out in CIRD 81800 and 89705 its requirements for the form and content of

a Research and Development claim which is made in an amended return. CIRD 81800

and 89705 make it very clear that HMRC requires such a claim to include a corporation tax

computation. Both CIRD 81800 and 89705 contain the following wording:

"From 1 April 2019 all R&D claims which are made in an amendment to a return

need to include a completed CT600 and a corporation tax computation.

.... However, where the corporation Tax Online Service is used to make an

amendment to a return but a company does not include both a completed CT600 and

a corporation tax computation no valid claim will have been made until both

documents have been received. Any missing document can be included as an

enclosure to an email.

[26]

This requirement was communicated to agents in HMRC Agent Update 70. The

Update made clear that the requirements would be set out in detail in CIRD81800 and

CIRD89705, and referred agents to these documents for the details. The Update states :

"From 1 April 2019 all claims for research and Development reliefs..... which form a

part of an amended return must include a completed CT600 and a Corporation Tax

computation.

Those items can be included as enclosures to an email. Potential claims without both

the completed CT600 and computations will be returned.

The changes do not affect amendments which are made electronically.

When the new rules commence details will be included in pages of the Corporate

Intangibles Research and Development Manual (CIRD81800 and CIRD89705) and in

the Company Taxation Manual on GOV.UK."

[27]

The Petitioner founds its argument that the changes do not apply to electronic

submissions on the sentence "The changes do not affect amendment which are made

electronically". However that sentence is a brief summary of the details set out in

CIRD81800 and CIRD89705, to which agents are referred by Update 70. It is CIRD818000

and CIRD89705, and not the summary in Update 70, which set out the requirements under

para 15(2) and (3) of Schedule 18. CIRD818000 and CIRD89705 state that electronic claims

which include a completed CT600 and a corporation tax computation are not affected by the

change, but where a company does not include both a completed CT600 and a corporation

tax computation no valid claim will have been made.

[28]

In these circumstances I find that HMRC has imposed a requirement in terms of

para 15(2) and (3) of Schedule 18 to the Finance Act 1998 that claims which are made in an

amendment to a return need to include a corporation tax computation. It follows that

HMRC made no error of law in rejecting the claim as being incomplete.

Ground 2: Wednesbury unreasonableness

Submissions for the Petitioner

[29]

Counsel for the Petitioner submitted that HMRC's decision to refuse to process the

claim was unreasonable. Schedule 18 Finance Act 1998 conferred a discretion on the HMRC

(para 83E) to allow a claim to be made after the time limit. The circumstances were (a) the

existence and the amount of the claim were notified within the time limit; (b) there was a

genuine attempt to file the corporation tax computation; (c) the documents that were filed

included all the information that would have enabled the HMRC to draw up the relevant

corporation tax computation; (d) the reason no further steps were taken until after the time

limit had expired was the intervening holiday period; (e) as soon as the holiday was over,

the Petitioner's agents took proactive steps; (f) on receipt of the letter dated 13 January 2022,

the Petitioner's agents took proactive steps to contact HMRC; (g) the missing corporation

tax computation was filed only 20 days late, on 20 January 2022; (h) HMRC cannot

reasonably have expected finality as at 20 January 2022; (i) the respondent would suffer no

material prejudice if required to process the claim; (j) if the prayer of the petition is granted

the respondents will be able to consider the claim in the normal way; (k) if the prayer is

refused the petitioner would lose entitlement to a relatively large amount of tax relief.

Weighed against this was little more than the fact that the corporation tax computation was

not filed before the time limit expired.

[30]

Counsel referred to HMRC Petitioners 2005 SLT 1061 and Martland v HMRC

[2018] UKUT 178 (TCC).

Submissions for HMRC

[31]

Under reference to M v Scottish Minister 2013 SLT 875 at [98] and R v Minister of

Defence ex p Smith [1996] QB 517 at page 554, counsel for HMRC submitted that irrationality

represented a substantial hurdle for the petitioner to overcome. A request under

paragraph 83(2) involved the exercise of a statutory discretion on the part of the officer in

question (HMRC Ptrs at paras [22]-[24]). The policy applied by HMRC in statement of

practice SP5/01 was consistent with the case law. In reaching a decision contained in a letter

of 23 February 2023, HMRC had applied the approach set out in that statement of practice.

The decision came within the range of decisions open to a reasonable tax authority, on the

basis of information which was put before it. Fresh evidence should only be considered in

very limited circumstances R v Secretary of State for the Environment ex p Powis

[1981] 1 WLR 584, E v Secretary of State for the Home Department 2004 QB 1044 at [66].

Analysis and decision

[32]

As I have held in respect of the first ground that the claim was invalid at the deadline

of 31 December 2021, I now turn to consider the refusal of HMRC to extend that deadline to

20 January 2022, when the missing computation was provided.

[33]

HMRC has a statutory discretion under paragraph 83(A)(2) of Schedule 18 of the

Finance Act 1998 to allow a claim which is submitted after the deadline. It has set out

in SP05/01 how it will go about exercising its discretion.

[34]

In this case, HMRC took account of SP05/01 and exercised its discretion against

allowing the late claim. In my opinion in exercising that discretion HMRC came to a

decision which was open to a reasonable tax authority on the basis of the information which

was put before it.

[35]

The exercise of such a discretion was considered in HMRC Ptrs. That case concerned

a statutory discretion under section 49 of the Taxes Management Act 1970 to allow a late

appeal against an assessment. Lord Drummond Young said:

"[22] Section 49 is a provision that is designed to permit appeals out of time. As such,

it should in my opinion be viewed in the same context as other provisions designed

to allow legal proceedings to be brought even though a time limit has expired. The

central provision of such features is that they are exceptional in nature; the normal

case is covered by the time limit, and particular reasons must be shown for

disregarding that limit. The limit must be regarded as the judgement of the

legislature as to the appropriate time within which proceedings must be brought in

the normal case, and particular reasons must be shown if a claimant or appellant is to

raise proceedings, or institute an appeal, beyond the period chosen by Parliament.

[23] Certain considerations are typically relevant to the question of whether

proceedings should be allowed beyond a time limit. In relation to a late appeal of the

sort contemplated by s 49, these include the following; it need hardly be added that

the list is not intended to be comprehensive. First, is there a reasonable excuse for not

observing the time limit, for example because the appellant was not aware and could

not with reasonable diligence have become aware that there were grounds for an

appeal? If the delay is in part caused by the actings of the Revenue, that could be a

very significant factor in deciding that there is a reasonable excuse. Secondly, once

the excuse has ceased to operate, for example because the appellant became aware of

the possibility of an appeal, have matters proceeded with reasonable expedition?

Thirdly, is there prejudice to one or other party if the appeal is allowed to proceed, or

if it is refused? Fourthly, are there considerations affecting the public interest if the

appeal is allowed to proceed, or if permission is refused? The public interest may

give rise to a number of issues. One is the policy of finality in litigation and other

legal proceedings; matters have to be brought to a conclusion within a reasonable

time, without the possibility of being reopened."

[36]

The grounds on which the Petitioner requested HMRC to exercise its discretion and

allow a late claim in this case were set out in the Request Letter, with further information

being provided in the letter of 8 July. HMRC responded in the Decision Letter.

[37]

In the Decision Letter HMRC noted that only exceptional cases for lateness can be

admitted under SP 05/01, and that the timeframe had been given by Parliament. That is

unimpeachable and accords with the dicta of Lord Drummond Young.

[38]

The Decision Letter considers the circumstances and concludes that the claim was

not delayed by any circumstances beyond the company's control and it was more likely that

the cause was oversight or negligence on the part of the company or its authorised

representatives in failing to take steps to deliver the computations before 31 December 2021

despite knowing that they had not been provided.

[39]

In my opinion HMRC was entitled to come to that conclusion. The Agents were

aware of the correct procedure and attempted to follow it: in the Request Letter they state

that their normal procedure was to attach a copy of the computation. Agents attempted and

succeeded in sending the computation for AP20. They attempted and failed in sending the

computation for AP19. Having failed to send the computation on-line on 23 December, they

did not attempt to send it on any subsequent day prior to the deadline of 31 December. Nor

did they follow the alternative procedure (which was set out in Agent Update 70,

CIRD81800 and CIRD 89705) of sending the computation by email.

[40]

The Decision Letter also addresses and rejects the argument made by Agents in the

Request Letter that the computations had previously been submitted. The Decision Letter

concludes that the requirement to lodge computations with an amended return is not met by

the computations having been delivered with the original return because firstly, the

requirement was to provide the computations with the amended claim, and secondly that if

the company now intended to claim relief the original computations were incorrect. In my

opinion HMRC were entitled to come to that conclusion for the reasons it gave. The reasons

given are not unreasonable in the Wednesbury sense.

[41]

In the petition the Petitioner elaborates on the argument made in the Request Letter

that the computations had been previously submitted. It makes the further point that the

documents that were filed included all the information that would have enabled the HMRC

to draw up the computation. In my opinion that gets the Petitioner no further. Our tax

system does no operate on the basis that a taxpayer provides some information to HMRC

and HMRC then analyses whatever past and current financial information it has so that

HMRC can work out whether the taxpayer has a claim. It operates on the basis that there is

a statutory framework which sets out what a taxpayer must lodge in order to make a claim.

If the taxpayer fails to lodge the information or computation required by statute, HMRC is

under no obligation to try to work out for itself what that information is or to draw up the

computation which the taxpayer has failed to provide. It follows that even if HMRC could

itself have worked out the computation on the basis of the amended claim and the original

computation, it was not obliged to do so and was entitled to exercise its discretion so as to

disallow a late claim.

[42]

The Decision Letter then goes on to address the Agents' claim that they were unable

to attach computations due to issues with the Agents' software.

[43]

In the Petition the Petitioner avers that it is believed that the failure of the submission

that included the computation was due to a problem within the Respondents' systems. That

is a material change of position by the Petitioner. In the Request Letter the Agents identify

the problem as being with the Agents' system alone: the Request Letter states "we were

having an issue with our CT software at that time" and makes no mention of any problems

with HMRC's systems. In the Letter of 8 July the Agents modified their position as to the

problem being "with Alphatax [i.e. the Agent's system] and/or the HMRC Portal". In

coming to its conclusion that the claim was not delayed by any circumstances beyond the

company's control and it was more likely that the cause was oversight or negligence on the

part of the company, the Decision Letter HMRC was entitled to proceed on the basis of the

facts put before it by the Agent, rather than the different factual position now set out in the

petition. The Decision Letter noted that it was difficult to see how if there were software

issues Agents managed to deliver the computation for period AP20. It stated that even if

HMRC accepted that software issues prevented the delivery of computations, the fact

remained that Agents failed to take any action to rectify the situation. As Agents failed to

rectify the situation by submitting the computation online or by email prior to 31 December,

it was not Wednesbury unreasonable for the Decision Letter to conclude that the cause was

oversight or negligence.

[44]

The Decision Letter then stated that having failed to provide a computation Agents

took no action to rectify the situation until contacted by HMRC. This is challenged by the

Petitioner on the ground that the reason no further steps were taken until after the time limit

had expired was the intervening holiday period, and as soon as the holiday was over Agents

took proactive steps by contacting the helpline. That challenge to the way in which HMRC

exercised its discretion fails on a number of counts. Firstly, the Agents took no action

between 23 December, when they knew that the attempt to lodge the computation had

failed, and the deadline of 31 December. They could have emailed the computation on

23 December itself, or between 23 December and the deadline if they continued to have a

difficulty with submitting on-line: CIRD81800 and CIRD 89705 explicitly state that:

"where the corporation tax online service is used to make an amendment to a return

but a company does not include... a corporation tax computation....any missing

document can be included as an enclosure to an email".

Secondly, it is no excuse that the Agents' offices were closed for the holiday period from

23 December 2021 to 4 January 2022. Where deadlines occur during a holiday period agents

should put in place arrangements to ensure that the deadlines are met, for example by

successfully lodging claims well in advance of the holiday closure, or by continuing to work

during the holiday period to meet the deadlines. The Agents did have such arrangements in

place: employees were required to work during the December break should client deadlines

require it. There was ample time between 23 and 31 December for Agents to make further

attempts to lodge the claim and computation on line (as they had successfully done with the

AP 20 claim) or to submit the computation by email. The telephone call by Agents to HMRC

on 4 January 2022 was not an attempt to lodge the computation but merely a query about

the timing of processing. It was not until after receipt of the HMRC letter of 13 January that

the Agents submitted the missing computation.

[45]

A further ground of challenge by the Petitioner is that the computation was filed

only 20 days late. In accordance with para 12 of the SP05/01 the Decision Letter gives

consideration to the degree of lateness. It concludes that while 20 days may not be

considered an excessive delay, Agents were fully aware that they had failed to provide

computations and took no action until contacted by HMRC. In my opinion, that conclusion

falls within the range of reasonable conclusions which would be available to a decision

maker. While another decision maker might have taken a different view in respect of the

20 day delay, it cannot be said that in exercising its discretion no reasonable decision maker

would have come to the decision which HMRC did on the delay. HMRC came to a balanced

decision on the question of delay. It recognised that the delay was a short one, but also took

into account the failure of the Agents to rectify the situation, of which they were fully aware,

by providing the computation online or by email either before 31 December or thereafter,

until HMRC raised it with them on 13 January.

[46]

I do not accept the Petitioner's argument that HMRC could not reasonably have

expected finality as at 20 January. Where there is a statutory deadline, both a taxpayer and

HMRC are entitled to expect finality at the deadline. It then becomes a matter for the

discretion of HMRC as to whether to extend the deadline, taking into account all relevant

circumstances.

[47]

The Petitioner also challenges the Decision Letter in respect of prejudice. In the letter

of 8 July the Agents raised the issue of Client Impact, emphasising the reliance that the

Petitioner has on R&D claims, with the R&D claims being a large factor in keeping the

Petitioner trading. This was considered in the Decision Letter, and the conclusion reached

was that a review of the most recent financial statements provided no reason to believe that

rejection of the claim would materially affect the long-term viability of the company. That

conclusion was not specifically challenged in this Petition, and in any event was a

conclusion HMRC were entitled to reach. Instead the Petitioner advanced an argument that

the Respondents would suffer no material prejudice if they were required to process the

claim, whereas refusal to allow the late claim would prejudice the Petitioner as it would lose

an entitlement to a relatively large amount of tax relief. In my opinion, that could be said of

any situation in which a taxpayer missed a deadline, and, when all the circumstances are

considered, does not make it unreasonable to refuse the extend the deadline in this case.

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