Reasonable penalty
The appellants were small companies with annual turnovers of around £100,000. S was the sole director of some of the companies, and co-director of others. Estimated corporation tax assessments were made on the companies for the years ending 1995 to 1999. The companies appealed.
Reasonable penalty
The appellants were small companies with annual turnovers of around £100,000. S was the sole director of some of the companies, and co-director of others. Estimated corporation tax assessments were made on the companies for the years ending 1995 to 1999. The companies appealed.
Abbreviated accounts were submitted in support of the appeals, but detailed profit and loss accounts were not produced. The Inspector was not satisfied with the company's record-keeping and was unable to reconcile the records with the abbreviated accounts. He wanted to determine the appeals by disallowing claims made for expenses incurred, which in some cases resulted in increasing the assessment.
S said that these were small companies within the meaning of the Companies Act 1985, and that they had fulfilled their obligations by producing abbreviated accounts. He said that the assessments were excessive, and should be reduced according to the accounts. The General Commissioners suggested that the Inspector could issue draft notices under Regulation 10(1) of the Statutory Instrument 1812 of the 1994 Regulations, as that would clarify to the company what information was required.
In January 2001, the General Commissioners determined penalties against the appellants for failing to comply with the notices, and further penalties were imposed in March for continued failure to comply. The companies appealed to the High Court.
Mr Justice Lightman said that section 11, Taxes Management Act 1970 drew a distinction between accounts and information, and said that a company might be required to produce information as well as accounts. The fact that a company was a small company within the Companies Act, did not excuse it from having to provide such information. In this instance, the Revenue was entitled to require the information asked for, and impose penalties if it was not supplied. The level of penalties actually set was modest, and no legitimate complaint was justified.
The appeals failed.
(Slater Ltd and others v General Commissioners of Income Tax for Beacontree and another, Chancery Division, 6 December 2001.)
