Untimely Tax Overpayment Claim: Rewarding Ignorance Not Permitted
Untimely tax overpayment claim: rewarding ignorance not permitted
‘Ignorance of the law is no excuse’ – a maxim that a group of property purchasers have found to significant cost in the form of unclaimed multiple dwellings relief. A taxpayer who overpays tax is entitled to claim a repayment, subject to time limits.
At issue in this case was the purchasers’ failure to claim MDR in time. MDR was abolished with effect from 1 June 2024 but the principles clarified by this ruling are applicable to claims for overpayments of tax in general.
A land transaction return is due 14 days after the completion of the purchase; and the time limit for amending a return is 12 months from this filing date. Here, the court had to consider whether ignorance of MDR, which meant relief was not claimed within the required time period, was a bar to overpayment relief under paras 34 & 34A Schedule 10 Finance Act 2003.
What’s the background?
The buyers purchased several residential properties between 2016 and 2019. It was not until sometime after the deadline for filing amended stamp duty land tax (SDLT) returns that they realised MDR had been available. They made a claim for overpayment relief.
HMRC relied on statutory provisions that it is not liable where there was a mistake in the initial claim or election, or a mistake in making or giving a claim or election (or failing to do so) under s34A(2).
A central issue was what ‘mistake’ means for the purposes of s34A(2). The Upper Tribunal concluded that “in ordinary language a person may be described as making a mistake where that person’s act or omission gives rise to an unwanted outcome… ‘a thing incorrectly done’”.
This is the case even if it is the result of oversight or ignorance. In this case, “where it is said to be a matter of ignorance, the mistake may properly be viewed as being the result of a failure to research or take advice, but it is a mistake nonetheless”. The judge emphasised the point by stating there is nothing unnatural, artificial or contrived about describing the failures to make claims for MDR as “mistakes”.
The UT upheld the First Tier Tribunal’s decision in favour of HMRC. The purchasers’ claims for overpayment relief were excluded by statute. It agreed with the FTTs view that a more “limited” meaning of the word ‘mistake’ would undermine the statutory provision – “… if a taxpayer who was unaware of an entitlement to claim multiple dwellings relief did not make a mistake in failing to make a claim, that would reward ignorance of the law because it would give a much longer time limit to make a claim”.
The ruling provides important clarification on the extent of the exclusions set out in s34(A) – and the implications for taxpayers who are genuinely ignorant of reliefs available. Always take specialist legal advice on the tax implications of your property transactions.
1LLO Contracting Limited and Others v HMRC [2025] UKUT 00127(TCC)
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