In the courts
Gift aid ‘throw back’ rejected on amended return
Gift aid relief can only be ‘thrown back’ to the previous tax year on an original tax return, not an amended tax return, according to a judgement of the First-Tier Tribunal Tax Chamber.
John Cameron, a farmer looking to retire, had sold a substantial part of his farming estate during the 2005-06 tax year. He wished to use a chunk of the sum raised to establish charitable trusts that would enable young people to see the world.
His advisers prepared his return for that tax year, which was received by HMRC on 4 September 2006. He was also advised that if he made a donation to the charity in the tax year 2006-07, he could obtain gift aid relief that could be ‘thrown back’ to the previous year, reducing the tax he would need to pay on the gains from the sale of his farming estate.
The Cameron Travel Scholarship Trust was duly established on 3 November 2006. The Office of the Scottish Charity Regulation confirmed its registration in January 2007 and Cameron paid £936,000 to the trustees. On 28 January 2007, Cameron’s advisors filed an amended return for 2005-06 to reflect the gift aid relief carry-back under s.8 of the Finance Act 2002.
HMRC, however, refused the claim. The Commissioners argued that under s.98(2) Finance Act 2002, such a claim could only be made in the original return, not an amended return.‘This is a case where common sense and fairness appear to be on the taxpayer’s side,’ said Judge Hellier in his summing up. ‘If I were permitted to use only those concepts as my guides I would find for the taxpayer. ‘Instead, the argument hinged on the interpretation of s98(2)a of the words ‘return… under s. 8 [Taxes Management Act 1970]’. The judge concluded that its literal meaning referred solely to an original return, not an amended return.
‘Is the result of such a literal interpretation absurdity or inconsistency? …it seems to me that it cannot be so characterised,’ said Judge Hellier. ‘It is, in the circumstances, an odd stipulation and one for which no clear policy may be evident, but that is not the same as absurdity or repugnance.’ He concluded that the ‘natural and literal’ meaning of ‘the date on which the donor delivers his return… under s.8 is the date on which his original return is delivered…’ The wider context of s.8 might mean that ‘return’ encompasses an amended return, but ‘there is nothing in that context which suggests that the delivery of that amendment is the delivery of a return under s.8’
If it’s any consolation for the out-of-pocket Cameron, Judge Hellier would have liked to have found in his favour, but felt unable to do so. His appeal was, therefore, dismissed.
John Cameron v Revenue & Customers Commissioners (TC00415) 2010, 19 January 2010
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