The High Court ruled that four-year time limits for tax assessments and enquiries applied when Revenue formed an opinion under the anti-avoidance provisions in section 811 of the Taxes Consolidation Act 1997.
The decision came on a case stated brought by the Revenue Commissioners after an Appeal Commissioner found for taxpayer Hans Droog. The High Court was asked whether the Appeal Commissioner was correct in law to hold that the time limits in sections 955 and 956 applied to the forming of a section 811 opinion.
Droog filed his 1996/1997 income tax return in January 1998, claiming £50,046 in loss relief for his share of losses from Taupe Partners, a film acquisition, distribution and licensing partnership. His assessment, issued the following month, allowed the relief.
In February 2007, a Revenue nominated officer notified Droog of an opinion that the partnership transaction was a tax avoidance transaction. The officer calculated that £24,022 in tax advantage should be withdrawn for 1996/1997 if the opinion became final and conclusive. Droog appealed, arguing, among other grounds, that the notice was out of time.
The Appeal Commissioner determined the appeal on the time-limit issue alone. The Commissioner found no suggestion of fraud or neglect in Droog’s return and concluded that the four-year limits applied, making the opinion invalid. Revenue appealed that determination to the High Court by way of case stated.
Revenue argued that section 811 empowered it to form an opinion “at any time” and that the time limits did not prevent the process. The court said the notice could lead to additional tax and that the formation of the opinion must have involved enquiries into the claim for relief. It concluded that section 811 did not expressly disapply the priority given to the self-assessment rules by section 950(2). The phrase “at any time” therefore meant within the applicable four-year period for self-assessed taxpayers.
The court also held that a later amendment made by the Finance Act 2008 did not determine the issue, as it did not apply to Droog’s transaction. The judgment did not decide what assessment, if any, would be required if an anti-avoidance opinion became final and conclusive.
The High Court answered that the Appeal Commissioner was correct in law. The judgment did not itself determine Droog’s underlying tax liability or separately order repayment or payment of tax.