Annex 1: Minor changes in the law made by the Act: Change 74: Deduction for expenditure on energy-saving items: drop the requirement for a claim: section 312
This change removes the requirement for a formal claim to relief for qualifying expenditure on energy-saving items.
Section 31A of ICTA allows a revenue deduction for capital expenditure meeting certain conditions on energy-saving items.
Section 31B(3) of ICTA requires a claim for relief under section 31A of ICTA. This requirement sits uneasily with Self Assessment and the general approach of this Act is not to require a claim for reliefs given as deductions in calculating profits of a trade or property business.
So section 312 drops the requirement to make a claim for relief, with the result that relief will be given by a deduction in the calculation of income in the taxpayer’s return. This simplifies the position and makes the administration of the relief consistent with trading and property income deductions generally.
The provisions that govern claims are not the same as the provisions that govern returns. But in practice the change from claim to deduction will have only the following consequences, which both relate to the time available for “claiming” the deduction.
First, the absolute time limit for making a claim is replaced by a time limit that may vary according to the particular circumstances. That may be because the return is issued late or because the taxpayer makes a late return. Accordingly, the Inland Revenue is no longer able to refuse a claim because it is late by reference to an absolute time limit: returns time limits and sanctions will apply and they depend on the date the return was issued and submitted.
Second, the time limit available to make the “claim” will normally reduce. That is because, as a formal claim, the time limit for a claim under section 31B of ICTA is (almost) 70 months from the end of the relevant tax year (section 43(1) of TMA) whereas as a deduction in a return the filing date time limit applies - normally (almost) ten months after the relevant tax year (section 8(1A) of TMA) or, for amendments to returns, 12 months after the filing date (section 9ZA(2) of TMA). However, error or mistake relief claims under section 33 of TMA will be possible if too much tax is paid as a result of omitting to include the deduction in the tax return. Claims under section 33 of TMA must be made within five years of 31 January following the tax year to which the return relates.
This change is adverse to some taxpayers and favourable to others in principle but is not expected to have any practical effect.