SACM20040 - Appendix 1: Old Error or Mistake Relief: Causal Link

From 1 April 2010, it is not possible to make a claim for the old error or mistake relief for any period. The relief is replaced by overpayment relief, see SACM12000+. You will only need the guidance in SACM Appendix 1 if you are dealing with a claim made before 1 April 2010.

Broadly TMA70/S33 provides relief for a person who has overpaid tax `by reason of some error or mistake in a return’.

There must therefore be a direct causal link between the error in the return and the excessive assessment.

Although a causal link is required, there need be no temporal link; in other words the return period need not coincide with the period of assessment; TMA70/S33 (1) and FA98/SCH18/PARA51 refer to `some error or mistake in a partnership statement’.

Provided that

• the error or mistake is in a return

and

• there is a direct causal link between that error or mistake and the assessment which is alleged to be excessive

it is possible for the purposes of relief provisions for the return which contains the error or mistake to be for Year 1 and yet because there are no assessable profits in the intervening years the assessment which is excessive by reason of that error or mistake is for a much later period, Year 5 say.

Once it is accepted that there is an error or mistake in a return and a causal link established between that error or mistake and the allegedly excessive assessment all that is required (provided the remaining conditions for relief are satisfied) is an answer to the question, what would have been the amount of the assessment if the return in question had not contained the error or mistake.

The above may be demonstrated by the following CT example:

Year 1	Case I losses	£100,000
Year 2	Case I profits	£70,000
Year 3	Case I profits	£80,000
Assessments
Year 1	CT profits	nil
Case I Losses carried forward from Year 1	£100,000
Year 2	Case I profits	£70,000
	Less Case I losses	£70,000
	CT profits	nil
Case I Losses carried forward from Year 2	£30,000 (£100,000 - £70,000)
Year 3	Case I profits	£80,000
	Less Case I losses	£30,000
	CT profits	£50,000

If it were shown that for Year 2 in that there were additional allowable Case I expenses of £20,000 then the assessment for Year 3 would be excessive. This is because insufficient losses from Year 1 will have been carried forward to Year 3 because of the error or mistake in the return for Year 2.