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Whose house?

08 December 2004
Issue: 3987 / Categories:

Whose house?

The taxpayer claimed certain costs in respect of maintaining the family home which he inherited on the death of his sister. The Revenue did not allow the costs, so the taxpayer appealed.

Whose house?

The taxpayer claimed certain costs in respect of maintaining the family home which he inherited on the death of his sister. The Revenue did not allow the costs, so the taxpayer appealed.

The taxpayer explained that on his father's death, he had been charged with maintaining the family home, even though it did not belong to him. He believed that his sister, who inherited the house on the death of their mother, tried to get the ownership changed, but failed. She did not tell him why, but he thought she was worried that if she told him that the solicitor refused to act, he would go to the solicitor's office and kill him. The taxpayer had been trained in unarmed combat during the Second World War.

The Commissioner noted that the appeal was concerned solely with the notice of determination relating to the ownership of the family home immediately before the sister's death. It was clear from the evidence that she was the owner of the house, and her title thereto was valid and unimpeachable. Thus the house formed part of her estate for IHT purposes.

The Commissioner took the trouble to explain to the taxpayer the figures in the determination and why extra tax had to be paid.

The taxpayer's appeal was refused.

(Thomson v CIR (SpC 429).)

Practicable association

The appellant company was an insurance broker, and had acquired four other companies over the years. The Revenue considered that, for the purposes of determining National Insurance, amounts paid by the companies to the director of the appellant company and of the other companies should be treated as a single payment of earnings. The company appealed. It said that this was not permissible, as it and the other companies did not carry on business in association within the meaning of Social Security (Contributions) Regulations 1979, SI 1979/591, reg 12(1)(a). Furthermore, even if they did work in association, reg 12(1) provided that such aggregation was only permitted if reasonably practicable.

The Special Commissioner said that there was no definition of business in association, but the following factors were relevant:

* all the companies carried on business related to insurance broking;

* administration was provided from the appellant company's office;

* all employees were employed by the appellant company;

* the appellant company provided administration services for all the companies;

* the director was a director of all the companies;

* the companies were under common ownership.

In the Special Commissioner's opinion, the companies were carrying on business in association, and while the director's duties as director related to each company separately, this did not mean that the companies were not carrying on business in association.

Finally, there was nothing impracticable about making the aggregation.

The company's appeal was dismissed.

(Samuels & Samuels Ltd v Richardson (SpC 431).)

Reasonable demand

The taxpayer was a diver. The Inspector of Taxes issued a TMA 1970, s 19A notice calling for all the taxpayer's records to be produced for the year to 30 June 2001. The taxpayer appealed against the notice, saying that his employer had provided the relevant information. The Inspector wrote back saying that the employer's records showed that the taxpayer had been paid £20,000 more than the amount disclosed in his tax return.

The Special Commissioner said that the Inspector had shown reasonable grounds for the issue of the s 19A notice.

The taxpayer's appeal was dismissed.

(Murphy v Gowers (SpC 434).)

Assessed or not?

The taxpayer company, Courts plc, offered its customers interest-free credit on purchases during eight consecutive three-monthly VAT periods from 1 October 1997 to 30 September 1999. The finance company providing the credit deducted a finance charge when it accounted to the taxpayer for the sale proceeds. In accordance with Primback v CCE [1996] STC 757, the taxpayer accounted for VAT on the sale price of the items, less the finance charge.

On 16 December 1999, a Customs officer completed and had signed a form VAT641, headed 'officer's assessment' for the eight periods. The form was not processed, but retained on file. Customs wrote to the taxpayer on the same day, saying that the assessment would be enforced if the Court of Appeal's decision in Primback were overturned. In May 2001, the decision was overturned ([2001] STC 803), and in November 2001, another form VAT641 was completed and processed. In December 2001, form VAT655, notifying the taxpayer of the assessment, was sent to the taxpayer.

The taxpayer's appeal against assessment to the tribunal and the High Court failed, so it appealed to the Court of Appeal. It argued that the form VAT641 completed in December 1999 did not constitute an assessment for the purposes of VAT Act 1994, s 73, since the assessing officer never made a decision to assess, but followed advice he had been given, and because the form had never been processed.

Lord Justice Jonathan Parker, who also heard the DFS ([2004] STC 559) appeal on a similar matter, said that the law did not require a distinction between deciding to make an assessment and the actual assessment itself. The making of an assessment was an internal matter for Customs, in respect of which there was no statutory procedure. In most cases it might well be that an assessment was made when the VAT641 was completed, but this could be the rule. However, given the facts of the instant case, the assessment was complete when the form was signed off in December 1999.

The taxpayer's appeal was dismissed.

(Courts plc v CCE, Court of Appeal, 17 November 2004.)

Inhuman delay

The applicant and J purchased a number of properties together between 1973 and 1991. From the 1970s onwards, the applicant's tax returns were incomplete. In 1982, the Inland Revenue began investigating a number of guesthouse businesses which were associated with the applicant and/or J. In 1987, the Hansard statement was read to him, and in 1989, the Revenue issued tax assessments against the applicant for the tax years 1972-73 to 1986-87.

In 1991, on the applicant's appeal to the Special Commissioners, some of the assessments were reduced, but the appeal was dismissed in substance. His subsequent appeals in 1993 and 1995 to the High Court and the Court of Appeal, respectively, were dismissed.

Meanwhile, in 1991, the General Commissioners issued a determination that interest was payable on the assessments from specified dates on which the tax should have been paid. In 1994, the Revenue issued penalty determinations. The applicant appealed. In 2000, the Special Commissioners dismissed the appeals. The applicant appealed to the High Court, which dismissed the appeal. The Court of Appeal refused permission to appeal from that decision later that year. The applicant complained to the European Court of Human Rights, saying that the length of the tax penalty proceedings against him exceeded a reasonable time contrary to the requirements of Article 6(1) of the European Convention on Human Rights.

The applicant submitted that the total period of delay was unreasonable and that the UK authorities were responsible for much of the delay. The Government argued that the applicant had delayed proceedings in order to defer the determination of his tax liabilities for as long as possible.

The Court ruled that the overall length of the proceedings had exceeded a reasonable time. The period to be taken into consideration was 13 years and ten months, i.e. from the reading of the Hansard statement to the Court of Appeal's refusal of leave to appeal in the second appeal. While the applicant did contribute to the delay, the authorities also had to take responsibility for some periods for which there was no reasonable justification for delay.

There had been a violation of Article 6 of the Convention.

(King v United Kingdom (App no 13881/02), European Court of Human Rights, 16 November 2004.)

Correctly assessed

A dentist appealed to the General Commissioners against an estimated assessment in respect of his profits for the years ending 31 March 1995, 1996, and 1997.

The General Commissioners upheld the assessment, so the taxpayer appealed to the High Court.

Mr Justice Etherton said that where trading profits were assessed under Sch D, Case II, as they were in this instance, the actual profit had to be used for the period, rather than basing the assessment on an average over a two-year period.

The taxpayer's appeal was dismissed.

(Chauhan v Wilson, Chancery Division, 17 November 2004.)

Property is let

The defendant company owned a building in Brussels. It entered into contracts with three other companies in the same group whereby they were allowed to carry on their activities in the building, subject to their having to vacate the building without notice.

The defendant claimed to deduct the input VAT on refurbishment work on the building, but the tax authority refused the claim, saying that the contracts were lettings of immovable property, and exempt from VAT under Belgian law. The appeal proceeded to the European Court of Justice.

The European Court said that letting was not defined in the Sixth Directive, but it meant the conferring, by a landlord to a tenant for an agreed period in return for payment, of a right to occupy a property, as if the tenant were the owner, and to the exclusion of others. It was not relevant that a decisive period was not specified. Article 13(B)(b) of the Sixth Directive meant that transactions where a company granted associated companies a licence to occupy a single property in return for a payment based on the area occupied, constituted lettings of immovable property.

(État belge v Temco Europe SA (Case C-284/03), European Court of Justice, 18 November 2004.)


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