“The reason why the Appellant was required to issue a credit note was because his property rental business, Hassan Khan & Co, the supplier of the office building spaces charging rent to its tenant, The Khan Partnership LLP, operates under the VAT cash accounting scheme. In order to make a bad debt relief claim, the first condition to satisfy is that the supplier must have already accounted for VAT on the supplies and paid it to HMRC.”
“268 Charge to tax on profits of a property busines Income tax is charged on the profits of a property business.”
“272 Profits of a property business: application of trading income rules (1) The profits of a property business are calculated in the same way as the profits of a trade. (2) But the provisions of Part 2 (trading income) which apply as a result of subsection (1) are limited to the following- In Chapter 3 (basic rules)— section 25 generally accepted accounting practice … section 27 receipts and expenses … In Chapter 4 (rules restricting deductions)— … section 35 bad and doubtful debts ...”
“272 Application of trading income rules: GAAP (1) … (2) In relation to a property business whose profits are calculated in accordance with GAAP, the provisions of Part 2 (trading income) which apply as a result of section 271E(1) are limited to the following— … section 27 receipts and expenses … section 35 bad and doubtful debts …” section 27 receipts and expenses section 35 bad and doubtful debts …”
“25 Generally accepted accounting practice (1) The profits of a trade to which the cash basis does not apply must be calculated in accordance with generally accepted accounting practice, subject to any adjustment required or authorised by law in calculating profits for income tax purposes…”
“27 Receipts and expenses (1) In the Income Tax Acts, in the context of the calculation of the profits of a trade, references to receipts and expenses are to any items brought into account as credits or debits in calculating the profits. (2) There is no implication that an amount has been actually received or paid. (3) This section is subject to any express provision to the contrary.”
“2 Cases in which Commissioners not liable to give effect to claim (1) The Commissioners are not liable to give effect to a claim under this Schedule if or to the extent that the claim falls within a case described in this paragraph (see also paragraphs 3A and 4(5)). (2) Case A is where the amount paid, or liable to be paid, is excessive by reason of— (a) a mistake in a claim, election or notice, (b) a mistake consisting of making or giving, or failing to make or give, a claim, election or notice, (3) Case B is where the claimant is or will be able to seek relief by taking other steps under the Income Tax Acts or an enactment relating to the taxation of capital gains. (4) Case C is where the claimant— (a) could have sought relief by taking such steps within a period that has now expired, and (b) knew, or ought reasonably to have known, before the end of that period that such relief was available. (5) Case D is where the claim is made on grounds that— (a) have been put to a court or tribunal in the course of an appeal by the claimant relating to the amount paid or liable to be paid, or (b) have been put to Her Majesty's Revenue and Customs in the course of an appeal by the claimant relating to that amount that is treated as having been determined by a tribunal (by virtue of section 54 (settling of appeals by agreement)). … (6) Case E is where the claimant knew, or ought reasonably to have known, of the grounds for the claim before the latest of the following— (a) the date on which an appeal by the claimant relating to the amount paid, or liable to be paid, in the course of which the ground could have been put forward (a “relevant appeal”) was determined by a court or tribunal (or is treated as having been so determined), (b) the date on which the claimant withdrew a relevant appeal to a court or tribunal, and (c) the end of the period in which the claimant was entitled to make a relevant appeal to a court or tribunal…” (a) a mistake in a claim, election or notice, (b) a mistake consisting of making or giving, or failing to make or give, a claim, election or notice, (a) could have sought relief by taking such steps within a period that has now expired, and (b) knew, or ought reasonably to have known, before the end of that period that such relief was available. (a) have been put to a court or tribunal in the course of an appeal by the claimant relating to the amount paid or liable to be paid, or (b) have been put to Her Majesty's Revenue and Customs in the course of an appeal by the claimant relating to that amount that is treated as having been determined by a tribunal (by virtue of section 54 (settling of appeals by agreement)). … (a) the date on which an appeal by the claimant relating to the amount paid, or liable to be paid, in the course of which the ground could have been put forward (a “relevant appeal”) was determined by a court or tribunal (or is treated as having been so determined), (b) the date on which the claimant withdrew a relevant appeal to a court or tribunal, and (c) the end of the period in which the claimant was entitled to make a relevant appeal to a court or tribunal…”
“an assessment of the amounts in which, on the basis of the information contained in the return and taking into account any relief or allowance a claim for which is included in the return, the person making the return is chargeable to income tax and capital gains tax for the year of assessment.”
“22. An enquiry, begun by way of an enquiry notice, is concluded by a closure notice. The closure notice comprises two elements: (1) A statement of the officer’s conclusions; and (2) A statement of what, if anything, must be done to give effect to those conclusions. 23. The whole point of tax returns and enquiries into them is to ensure that the public interest in taxpayers paying the correct amount of tax is met. To that end, HMRC must have an appropriate ability to examine the return, but the taxpayer must have a fair opportunity to challenge (by way of appeal) either (i) the conclusions of HMRC or (ii) the manner in which those conclusions have been given effect to (by way of amendments to the return) ... 24. It is important to appreciate that the conclusions of a closure notice are distinct from the amendments that may arise out of those conclusions. Obviously, there is a nexus between the two – the amendments implement the conclusions reached – but they are very different things. The conclusions in a closure notice consist of a statement why the taxpayer’s return is incorrect (if it is), whereas the amendments set out how the return must be corrected in order to give effect to those conclusions. A closure notice must state the officer’s conclusions; and having issued a closure notice, HMRC has no power to amend the relevant return other than to give effect to the conclusions: Bristol & West at [24]; Investec at [51].”
“(5) It is desirable that the statement by the officer of his conclusions should be as informative as possible: Tower MCashback at [83]; Fidex at [42]. Furthermore, notices are given at the conclusion of an enquiry, and must be read in context. It will be rare for a notice to be sent without some previous indication during the enquiry of the points that have attracted the officer’s attention: Tower MCashback at [84]; Fidex at [42], [45]; Lavery at [37]. That said, a narrowly drawn closure notice – properly construed – cannot be widened by reference to the scope of the enquiry which preceded it: Lavery at [34]. (6) It is not appropriate to construe a closure notice as if it were a statute: Fidex at [51]; Lavery at [28]. The ordinary rules of construction apply to closure notices, and the question of construction is a mixed question of fact and law: the identification of the relevant circumstances and context in which the document is to be construed is a question of fact, whilst the meaning of the document – construed within that context, as found – is a question of law: Lavery at [36]. Essentially, when approaching the question of construction, it is appropriate to consider how the reasonable recipient of the notice, standing in the shoes of the taxpayer, would have construed it: Lavery at [42].”
“…we must bear in mind that it is perfectly possible for the consequential adjustment in a closure notice itself to be in error, in that it fails to articulate the adjustment required by the conclusion articulated by the officer.”
“45. In my judgment the principles to be applied are those set out by Henderson J as approved by and elaborated upon by the Supreme Court. So far as material to this appeal, they may be summarised in the following propositions: (i) The scope and subject matter of an appeal are defined by the conclusions stated in the closure notice and by the amendments required to give effect to those conclusions. (ii) What matters are the conclusions set out in the closure notice, not the process of reasoning by which HMRC reached those conclusions. (iii) The closure notice must be read in context in order properly to understand its meaning. (iv) Subject always to the requirements of fairness and proper case management, HMRC can advance new arguments before the FTT to support the conclusions set out in the closure notice.”
“22. …In the ordinary course, there is a presumption that the same expression used in different provisions of a statute has the same meaning wherever it appears. There is also a presumption that differences in the language used to describe comparable concepts are intended to reflect differences in meaning. But the latter presumption is generally weaker than the former, because the use of the same expression is more likely to be deliberate. It will readily be displaced if there is another plausible explanation of the difference.”
“75. When considering the meaning of a word or phrase that is used more than once in the same instrument one starts with a presumption that it bears the same meaning wherever it appears. That is not, however, an irrebuttable presumption. It depends upon the nature of the word or phrase in question and the contexts in which it appears in the instrument...”
“Save for one point, there is no dispute about the principles of statutory interpretation. The basic principles are that the words of the statute should be interpreted in the sense which best reflects their ordinary and natural meaning and accords with the purposes of the legislation. It is generally reasonable to assume that language has been used consistently by the legislature so that the same phrase when used in different places in a statute will bear the same meaning on each occasion - all the more so where the phrase has been expressly defined.”
“192. As Lord Nicholls explained in Spath Holme, p 397: “Citizens, with the assistance of their advisers, are intended to be able to understand parliamentary enactments, so that they can regulate their conduct accordingly. They should be able to rely upon what they read in an Act of Parliament…”
“60. First, the phrases are to be found in the same Act. It would be surprising if Parliament intended to give them different meanings in the same Act. Parliament did not give the phrase a special or different meaning in section 1219(3)(a): it simply amended the equivalent predecessor legislation by introducing what is a short phrase. Moreover, that phrase was already well known from other parts of the tax code, in particular what is now section 53(1). It should also be recalled that the CTA 2009 was enacted as part of the Tax Law Rewrite project. One of the purposes of that project was to set out tax legislation in a comprehensive way that could be understood by a reasonably informed taxpayer: see R (Derry) v HMRC[2019] UKSC 19 ;[2019] 1 WLR 2754 , at paras. 7-10 (Lord Carnwath JSC). I note that, at para. 10, Lord Carnwath said that the purpose of the project was "in particular to give clear pointers to each stage of the taxpayer's journey to fiscal enlightenment.”
“Decisions of the court upon the meanings of phrases used in Acts of Parliament may come, in the course of time, to give them the quality of terms of art which Parliament may well be assumed to have intended them to bring with them when used in subsequent legislation. In section 265, for example, terms such as "domiciled," "personally present," "ordinarily resident," have had attributed to them, both in the context of bankruptcy and in that of civil procedure generally, a wealth of refined construction which it is difficult to suppose Parliament did not intend equally to apply when those words were used in the Act of 1986. Is there any reason why that should not apply equally to the words "has carried on business?" There does not seem to me to be anything in the policy of the new Act which suggests that in this provision Parliament was intending to give those words a different meaning from those which they had been held to bear under the Act of 1914.”
“370 Income charged (1) Tax is charged under this Chapter on the full amount of the interest arising in the tax year.” … 403 Income charged (1) Tax is charged under this Chapter on the amount of the dividends arising in the tax year.”
“set out tax legislation in a comprehensive way that could be understood by a reasonably informed taxpayer.”
“[1507] The word “arising” has been the subject of a number of tax cases. “Arising” includes received and also credited to a bank account (Parkside Leasing v Smith (1984), 58 TC 282 HC). However, “arising” has a wider meaning than this. For example, it was held in Dunmore v McGowan (1978), 52 TC 307 CA, to include the “swelling of a person’s assets”, even where the person had no immediate right of access to the income. In view of the wide meaning given to “arising”, and the fact that it is a term with which practitioners are familiar, the word has been retained.”
“[1636] Subsection (1) charges tax on the full amount of the dividends arising in the tax year. The term “arising” has been retained (see the commentary on income charged in Chapter 2 of Part 4 of this Act [i.e. s.370]). The arising basis is different from the paid basis which applies to the charge to tax on dividends and other distributions from UK resident companies (for a discussion of the paid basis see the commentary on Chapter 3 of Part 4 of this Act) and, given they do not mean exactly the same, “paid” has not been used in this context.”
“It is true that the interest was accruing, and indeed was being compounded on a quarterly basis, but it was being retained by the bank. To my mind, therefore, while it may have been a debt which was accruing, and could be called by Orange at any time on notice, it was not, as a matter of ordinary language, income, until it was paid. … In the present case, the interest may have been 'accruing' until18 December 1992 , but I do not think one can say that 'every penny of that interest inured' to Orange's benefit until it was paid on that day.”
“I appreciate that in Dunmore v McGowan (Inspector of Taxes)[1978] STC 217 at 219,[1978] 1 WLR 617 at 618 Stamp LJ (with whom the other members of the Court of Appeal agreed) said that 'the doctrine that “receivability without receipt is nothing” is a doctrine which can be pressed too far'. However, that was in a case where the taxpayer was arguing that payment of interest by the bank into an account at the bank, set up by agreement between the taxpayer and the bank, for the taxpayer's own benefit, was not 'income arising' when it was paid, because the account was charged to the bank to support a guarantee given by the taxpayer to the bank. Despite the fact that, because of the existence of the charge, the taxpayer could not do what he liked with the interest, on the date that the interest was paid into the account 'every penny of that interest enured to the taxpayer's benefit in any event; it swelled the assets of the taxpayer on that day' (see[1976] STC 433 at 439,[1976] 1 WLR 1086 at 1090per Brightman J) which Stamp LJ fully endorsed (see[1978] STC 217 at 219,[1978] 1 WLR 617 at 619). In the present case, the interest may have been 'accruing' until18 December 1992 , but I do not think one can say that 'every penny of that interest inured' to Orange's benefit until it was paid on that day. … Following the initial agreement in correspondence between Orange and the bank, no interest was credited to any account in the name of Orange, or in favour of Orange. Furthermore, while Orange had the right at any time to 'get' the interest, either by asking for it or by closing the deposit account, it would not, as a matter ofordinary language, 'get' the interest until it asked for it or closed the account or until January 1993.”
“I also derive comfort from an extract to which I have been referred in the Revenue's Assessment Procedures Manual. At para 2180, one finds the following under the heading 'Assessment Procedure schedule Case III/general/date when income “arises”
“Under Section 100 of the Income Tax Act, 1918, provision is made that there shall be a return made by "every person chargeable under this Act", and the correct statement in writing is to contain "the amount of the profits or gains arising to him, from each and every source chargeable according to the respective schedules". Observe it says "arising to him". If it has not arisen to him, if he has not become the dominus of this sum, if it does not lie to his order in the hands of his agent, can it be said that it has arisen to him? I think the answer definitely upon the facts must be: No, it has not.”
“In January 2017, Jennifer makes a loan of£5,000 to her cousin to help him set up a business. They agree that interest will be payable quarterly in arrears at a rate of 5% per annum. But the business initially struggles, and Jennifer does not receive any interest until June 2018 when, after she threatens legal action, her cousin repays the debt along with interest arrears of£875 . Jennifer is not required to pay any tax on the interest until 2018/19 when it arises. However, the whole£875 is taxable when she receives it. She cannot spread the arrears of interest over the years in which it accrued.”
“The tax charge The charge to tax on foreign dividends is on the full amount of the dividends arising in the tax year - ITTOIA05/403. This is different from the paid basis that applies to dividends and other distributions from other UK companies.”
“29. The courts in conducting statutory interpretation are “seeking the meaning of the words which Parliament used”: Black-Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG[1975] AC 591 , 613 per Lord Reid of Drem. More recently, Lord Nicholls of Birkenhead stated: “Statutory interpretation is an exercise which requires the court to identify the meaning borne by the words in question in the particular context.” (R v Secretary of State for the Environment, Transport and the Regions, Ex p Spath Holme Ltd[2001] AC 349 , 396). Words and passages in a statute derive their meaning from their context. A phrase or passage must be read in the context of the section as a whole and in the wider context of a relevant group of sections. Other provisions in a statute and the statute as a whole may provide the relevant context. They are the words which Parliament has chosen to enact as an expression of the purpose of the legislation and are therefore the primary source by which meaning is ascertained. There is an important constitutional reason for having regard primarily to the statutory context as Lord Nicholls explained in Spath Holme, 397: “Citizens, with the assistance of their advisers, are intended to be able to understand parliamentary enactments, so that they can regulate their conduct accordingly. They should be able to rely upon what they read in an Act of Parliament.” 30. External aids to interpretation therefore must play a secondary role. Explanatory notes, prepared under the authority of Parliament, may cast light on the meaning of particular statutory provisions. Other sources, such as Law Commission reports, reports of Royal Commissions and advisory committees, and Government White Papers may disclose the background to a statute and assist the court to identify not only the mischief which it addresses but also the purpose of the legislation, thereby assisting a purposive interpretation of a particular statutory provision. The context disclosed by such materials is relevant to assist the court to ascertain the meaning of the statute, whether or not there is ambiguity and uncertainty, and indeed may reveal ambiguity or uncertainty: Bennion, Bailey and Norbury on Statutory Interpretation, 8th ed (2020), para 11.2. But none of these external aids displace the meanings conveyed by the words of a statute that, after consideration of that context, are clear and unambiguous and which do not produce absurdity... 31. Statutory interpretation involves an objective assessment of the meaning which a reasonable legislature as a body would be seeking to convey in using the statutory words which are being considered. Lord Nicholls, again in Spath Holme, 396, in an important passage stated: “The task of the court is often said to be to ascertain the intention of Parliament expressed in the language under consideration. This is correct and may be helpful, so long as it is remembered that the ‘intention of Parliament’ is an objective concept, not subjective. The phrase is a shorthand reference to the intention which the court reasonably imputes to Parliament in respect of the language used. It is not the subjective intention of the minister or other persons who promoted the legislation. Nor is it the subjective intention of the draftsman, or of individual members or even of a majority of individual members of either House. … Thus, when courts say that such-and-such a meaning ‘cannot be what Parliament intended’, they are saying only that the words under consideration cannot reasonably be taken as used by Parliament with that meaning.” 32. ... Such references are not a legitimate aid to statutory interpretation unless the three conditions set out by Lord Browne-Wilkinson in Pepper v Hart[1993] AC 593 , 640 are met. The three conditions are (i) that the legislative provision must be ambiguous, obscure or, on a conventional interpretation, lead to absurdity; (ii) that the material must be or include one or more statements by a minister or other promoter of the Bill; and (iii) the statement must be clear and unequivocal on the point of interpretation which the court is considering. It was not argued, and I am not satisfied, that the first and third conditions are met in this case. The court was not referred to any relevant provision of primary legislation that was said to be ambiguous and the statements in any event did not meet the stringent requirements of the third condition…” “Statutory interpretation is an exercise which requires the court to identify the meaning borne by the words in question in the particular context.” “Citizens, with the assistance of their advisers, are intended to be able to understand parliamentary enactments, so that they can regulate their conduct accordingly. They should be able to rely upon what they read in an Act of Parliament.” “The task of the court is often said to be to ascertain the intention of Parliament expressed in the language under consideration. This is correct and may be helpful, so long as it is remembered that the ‘intention of Parliament’ is an objective concept, not subjective. The phrase is a shorthand reference to the intention which the court reasonably imputes to Parliament in respect of the language used. It is not the subjective intention of the minister or other persons who promoted the legislation. Nor is it the subjective intention of the draftsman, or of individual members or even of a majority of individual members of either House. … Thus, when courts say that such-and-such a meaning ‘cannot be what Parliament intended’, they are saying only that the words under consideration cannot reasonably be taken as used by Parliament with that meaning.”
“the person liable for any tax charged under this Chapter is the person receiving or entitled to the profits.”
“7 Income charged (1) Tax is charged under this Chapter on the full amount of the profits of the tax year.”
“tax is charged under this chapter on the full amount of the profits arising in the tax year.”
“275 Apportionment etc. of profits to tax year (1) This section applies if a period of account of a property business does not coincide with a tax year. (2) Any of the following steps may be taken if they are necessary in order to arrive at the profits or losses of the tax year— (a) apportioning the profits or losses of a period of account to the parts of that period falling in different tax years, and (b) adding the profits or losses of a period of account (or part of a period) to profits or losses of other periods of account (or parts). (3) The steps must be taken by reference to the number of days in the periods concerned. (4) But the person carrying on the business may use a different way of measuring the length of the periods concerned if— (a) it is reasonable to do so, and (b) the way of measuring the length of periods is used consistently for the purposes of the business.” (a) apportioning the profits or losses of a period of account to the parts of that period falling in different tax years, and (b) adding the profits or losses of a period of account (or part of a period) to profits or losses of other periods of account (or parts). (a) it is reasonable to do so, and (b) the way of measuring the length of periods is used consistently for the purposes of the business.”
“Section 275: Apportionment of profits to tax year 1100. This section deals with cases where the period of account does not coincide with a tax year. It is based on sections 21A, 72 and 65A of ICTA. 1101 This section is necessary because the charge under section 270 is on the property business profits arising in the tax year. 1102 In the source legislation section 72 of ICTA is one of the provisions applied to Schedule A specifically by section 21A(2) of ICTA. Section 72 of ICTA is rewritten for trade profits in section 203. But simple cross-reference to that trading income section would not work very well for property income because that section is drafted in terms of basis periods and basis periods are not relevant to property income. So section 275 is a specific property income version. 1103 Subsection (4) adopts the approach of section 203(4) in permitting an alternative basis of apportionment if its use is reasonable and consistent. See Change 52 in Annex 1. The wording of subsection (4) makes it clear that the option to choose an alternative basis of apportionment is exercisable only by the taxpayer, not the Inland Revenue.”
“272 Profits of a property business: application of trading income rules (1) The profits of a property business are calculated in the same way as the profits of a trade”
“(1) The profits of a property business for a tax year must be calculated in accordance with GAAP if condition A, B, C, D or E is met ... (4) Condition B is that the cash basis receipts for the tax year exceed£150,000 . (5) In subsection (4) “the cash basis receipts for the tax year” means the total of the amounts that would be brought into account as receipts in calculating the profits of the property business for the tax year on the cash basis (see section 271D) … (10) Condition E is that an election under this subsection made by the person who is or has been carrying on the property business has effect in relation to the business for the tax year. … (11) An election under subsection (10) must be made on or before the first anniversary of the normal self-assessment filing date for the tax year for which the election is made.”
“Box 20.2 Traditional accounting or cash basis Put “X” in box 20.2 if you used traditional accounting instead of cash basis.”
“(1) In the Income Tax Acts, in the context of the calculation of the profits of a trade, references to receipts and expenses are to any items brought into account as credits or debits in calculating the profits. (2) There is no implication that an amount has been actually received or paid. (3) This section is subject to any express provision to the contrary.”