The Upper Tribunal has opened the door for Robert Ames’ late claim for Enterprise Investment Scheme relief. The case is a perfect example of a quite unnecessary restriction in the law – which provides that an individual may only claim exemption from capital gains tax on the sale of shares where income tax relief has previously been claimed on the share subscription. HMRC thus refused Mr Ames capital gains tax relief on his later sale of the shares. There’s no good reason for linking the claims, but the Upper Tribunal found it was the law. Mr Ames hadn’t claimed income tax relief on his share subscription, as his income that year was only £42. This was well below the personal allowance, which was given automatically in HMRC’s online Self Assessment system, as his counsel Keith Gordon pointed out.
It was suggested at the First Tier Tribunal hearing that Mr Ames could have submitted a late claim for income tax relief -so he did. HMRC turned him down, though.
Mr Ames sought judicial review of HMRC’s decision. Mr Justice Fancourt and Judge Greg Sinfield decided to quash the original decision.
HMRC’s care and management powers under section 5(1) of the Commissioners for Revenue and Customs Act 2005 allow it to accept late claims. The HMRC officer who refused the late claim did not consider whether this was one of those “…exceptional cases that do not meet these conditions and are not covered by guidance concerning the particular claim or election, where it may still be unreasonable for HMRC to refuse a late claim or election.”
The judges ordered HMRC to remake its decision, with a broad hint that this case was likely to be sufficiently exceptional to allow a late claim.