In John Jackson v HMRC [2017] TC05818 the First-tier Tribunal allowed a late application for enhanced protection: the taxpayer had a reasonable excuse for his latenesss.
When the lifetime allowance was introduced in 2006 taxpayers could apply for ‘enhanced protection’ to protect them against any future charge:
- Applications for enhanced protection had to be made by 5 April 2009.
- HMRC would consider a late application only if:
- the taxpayer had a reasonable excuse for missing the deadline, and
- there was no unreasonable delay in applying after that excuse ended.
The taxpayer was a Chartered Accountant who was advised by his financial advisers that he would have to apply for enhanced protection in October 2005:
- For reasons that were never established the advisers failed to file an application.
- However, both the taxpayer and his advisers were under the impression protection had been applied for and granted.
- It was only when the taxpayer came to draw down funds in February 2014 that the error was spotted.
- The advisers contacted HMRC shortly afterwards, and an application form was finally submitted in October 2014.
HMRC rejected the late application on the basis the taxpayer did not have a reasonable excuse.
The First-tier Tribunal disagreed with HMRC:
- The taxpayer acted reasonably in relying on his advisers to deal with the application and accepting their assurances that protection was in place: he therefore had a reasonable excuse.
- The taxpayer was aware that an application was required, but had no knowledge of what this involved or that he was required to sign a form.
- Every indication he received from his advisers confirmed that an application had been made.
- If the taxpayer had asked for further assurance or confirmation the error may have been spotted in time, but that was not relevant to whether he took reasonable care.
- There was no unreasonable delay: the advisers contacted HMRC as soon as the error came to light and the only reason it took so long to submit the form was because there had been several interactions with HMRC in the meantime.
Comments
In the similar recent case of Gordon Anthony Yablon v HMRC [2016] TC 05539 a late application for enhanced protection was refused. An adviser had told the taxpayer they had to sign an application form, but then failed to prepare it. In that case the FTT found that a reasonable taxpayer would have chased up his adviser to check on progress as the deadline approached.
The distinguishing factor in the current case appears to be that the taxpayer's advisers were under the impression that an application had been made, and led the taxpayer to believe that. The FTT was also convinced that the taxpayer (despite being a Chartered Accountant) was unaware he had to sign a form.
Links
Our subscriber guide: Pensions: tax rules and planning
Case reference: John Jackson v HMRC [2017] TC05818
Do you like our content and want to know more? Sign up now * for Nichola's FREE SME tax news, tips and topical updates...read more
*There are no strings attached: you will be free to unsubscribe at any time and we don't pass on anyone's details to anyone else and as you can see we don't blur our content with annoying adverts.
