Reaching a settlement with HM Revenue and Customs (HMRC) in a tax dispute will normally lead to a letter of offer being agreed with them and signed by the taxpayer(s).

A recent case before the First-tier Tribunal (FTT) confirms the finality of such agreements.

It concerned the estate of a farmer who died in 2005. His estate did not attract Inheritance Tax (IHT) because it was (after taking into account Agricultural Property Relief) below the nil-rate threshold for IHT.

A year later, the farm was sold for £800,000 and, after negotiations with HMRC over the appropriate valuation of the farm on the date of death, an offer to settle a dispute over the correct amount of Capital Gains Tax payable was agreed, on behalf of the taxpayers, in 2010 and a payment of £26,000 was made.

Although the taxpayers complained to HMRC on the basis that no proper valuation of the farm had been carried out, the complaint was not upheld.

The taxpayers appealed to the FTT. However, their appeal was rejected by the Tribunal on the ground that it did not have jurisdiction to hear it: the agreement they had signed in 2010 was contractual and the FTT does not have the right to consider matters which are agreed by contract.

Although the judge was careful to point out the possibility that the taxpayers could attempt to recover the tax they believed they had overpaid by commencing proceedings in the County Court, he gave a clear warning that ‘nothing I have said should be taken as encouraging such a course of action’.


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