STC 218; 58 TC 592]
As with Cenlon Finance Company Ltd v Ellwood, this was a corporation tax case but the principle established applies to all taxes. The taxpayer company carried on two trades. One of the trades ceased and in the year following cessation, the company claimed set off of the excess interest payments brought forward against profits of the continuing trade, reducing the assessable profits to nil and leaving a balance of excess interest payments to carry forward. The Inland Revenue agreed the computations. The following year, the company claimed set off of the excess interest payments brought forward, on the same basis as the previous year. A new inspector had taken over the case and refused the claim. He also sought to reopen the computations for the previous year.
It was held that the computations for the earlier year could not be reopened as there had been implicit agreement by the first inspector that he had agreed the particular point as it was fundamental to the whole basis of the computation. The point had been sufficiently well described in the computations that the first inspector had been in full position of all of the relevant facts to enable him to understand the position.
HMRC considers that an agreement under TMA 1970, s54 is not binding where there has been an arithmetical error in the computations.