Lord ordinary refuses petition seeking review of HMRC decision not to allow late research credit claim

About this case:

• Citation:
  [2024] CSOH 1
• Judgment:
  External link
• Court:
  Court of Session Outer House
• Judge:
  Lord Ericht

Bureau Workspace Ltd argued that HMRC erred in law by refusing to process the claim because it was not accompanied by a corporation tax computation. Alternatively, if there was no such error of law, the refusal to process the claim was Wednesbury unreasonable.

The case was heard by Lord Ericht. Simpson KC appeared for the petitioner and Roxburgh, advocate, for the respondent.

Plain language

The claim arose after the petitioner’s corporation tax advisors for the accounting period 1 January to 31 December 2020 (AP20) identified that it was entitled to a Research and Development Expenditure Credit under section 1044 of the Corporation Tax Act 2009. 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 before 31 December 2021. On 23 December 2021, the last working day for the agents of the year, an attempt was made to file the amended return and computation online, but this was not successful. Instead, the return without computation was filed online.

On 13 January 2022, HMRC wrote to the petitioner informing it that the claim would not be dealt with due to being incomplete. Attempts to persuade HMRC to allow a late claim were unsuccessful. Counsel for the petitioner submitted that the Finance Act 1998 did not create a requirement that the corporation tax computation be filed at the same time as the amended return, as contended for by HMRC.

For HMRC it was submitted that it was clear 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. On whether the decision was unreasonable, it submitted that its policy was consistent with case law and refusal was within the range of decisions reasonably open to it.

Only exceptional cases

In his opinion, Lord Ericht observed: “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.”

He continued: “HMRC sets out in [Corporate Intangibles Research and Development Manuals] 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.”

Turning to the arguments on Wednesbury unreasonableness, Lord Ericht said: “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 [in HMRC Ptrs (2005)].”

He concluded:: “The Letter 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.”

The petition was therefore refused.