The Upper Tribunal has released its decision concerning changing the reason for a claim, without it becoming a new and out of time claim.
For background, the taxpayer had a historic claim for overpaid output tax that was disputed by HMRC. Having settled a later separate output VAT dispute, the earlier FTT agreed the reasons of the settled claim could be substituted for the disputed claim, up to the amount of the disputed claim. The UT has overturned the earlier FTT.
HMRC’s view was that although a claim could be amended after submission, the law did not permit one claim to be replaced with another, based on completely different reasons, in a case where the relevant periods had in the interim gone out of time. The underlying facts of a claim must remain the same, otherwise an amended claim is actually a new claim and not an amendment of the original claim.
While accepting that an overpayment had been made, HMRC considered the approach by the FTT to be a breach of the legal certainty that the UK time limit imposed.
The UT looked at the elements of a claim. A s80 claim is for a sum of money related to particular transactions in respect of which VAT has been accounted for but is not due. Therefore, a claim made for one reason cannot be subsumed into a claim made for another reason as both claims relate to different transactions.
The UT then went on to consider the Regulations that govern the making of claims. A claim is not defined by its amount alone but also by the method of its calculation. It is not reasonable to conclude, as the FTT had, that the amount cannot be increased while at the same time saying that the method by which the amount is calculated can be changed at will while the claim remains open.
A claim can be increased to correct errors and omissions, but its scope cannot be enlarged by including new elements or by changing the basis / subject matter of the claim completely. To do so would circumvent the cap. HMRC’s appeal was allowed. To access the decision click here.