Occasionally, tax involves the exact meaning of certain words. I was recently looking at some legislation that referred to two companies being ‘under common control’ if they were controlled by the ‘same person’. Did that mean the companies could not be ‘under common control’ unless they were controlled by one shareholder? Then I remembered the 1978 Interpretation Act (which applies to all legislation, not just that for tax). In section 6, it says: “words in the singular include the plural and words in the plural include the singular”. Companies could be controlled by the same persons, and they would be ‘under common control’ for the purposes of the legislation I was looking at.
Postal disputes
The Interpretation Act does not figure very often in tax matters, but in one important area it can make the difference between a penalty for late filing and a ‘reasonable excuse’ or it can prevent HMRC opening up a tax enquiry if they are too late in serving notice on you.
The relevant section is section 7, which deals with ‘References to service by post’. It states:
“Where an Act authorises or requires any document to be served by post (whether the expression ‘serve’ or the expression ‘give’ or ‘send or any other expression is used) then, unless the contrary intention appears, the service is deemed to be effected by properly addressing, pre-paying and posting a letter containing the document and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.”
‘The ordinary course of post’ has been established by several cases, and is:
· For first class post, the second working day after the posting day – so if you post something first class so it catches the last post on Wednesday, you can expect it to arrive by Friday, but if you post it on Thursday you can expect it to arrive by the following Monday; and
· For second class post, the fourth working day after the posting day – so if you catch Monday’s post, you can expect the letter to be delivered on Friday.
Tax returns and HMRC enquiries
The legislation says ‘unless the contrary is proved’, so if you posted your 2013/14 self-assessment return first class to HMRC on Wednesday 29 October (or on Monday 27 October if you used second class post), you could still be charged a penalty of £100 if it is delayed in the post and does not arrive until Tuesday 3 November, but section 7 of the Interpretation Act should provide you with a ‘reasonable excuse’ to get the penalty cancelled if you can prove you posted the return within the time limits above.
This works both ways – HMRC also have to adhere to certain time limits, and the one that most often causes problems is the deadline for opening an enquiry into a tax return. HMRC must serve notice that they are opening an enquiry within twelve months of the date the return was filed (assuming it was not filed late).
Remember the words ‘unless the contrary is proved’ – if you can show that you did not receive the letter notifying you about the enquiry until after the twelve month deadline, then the notice is invalid, and unless HMRC can show they have reason to believe there is something wrong with your return, they cannot open an enquiry.
Practical Tip
Remember the posting times in the Interpretation Act, and if HMRC serve a notice late, don’t just accept that they have a right to ask questions – keep the envelope the letter arrived in, if the postmark is legible!
