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Negligent returns
In 1991, the accountants of the appellants, a husband and wife who ran a clothing shop, filed returns for the accounting years 1986-87 to 1991-92 and for the partnership for the years to 30 April 1988, 1989 and 1990. The accountants later provided further information relating to the husband's returns. The Inspector launched an investigation into the business partnership and the husband for all years in question. In 1993, the appellants' then accountants submitted accounts and computations for 1991 to 1993. In 1996, the appellants' current accountants filed returns for the years to 30 April 1994 and 1995 and to end of December 1995 when the business was closed. The Inspector made TMA 1970, s 29 assessments in respect of the husband for the years 1985-86, 1988-89 and 1989-90, and further and estimated assessments on the business for the years 1987-88 to 1994-95.
The taxpayers appealed. It was agreed that those assessments that were out of time were within 20 years of the relevant year. The Revenue said that there were no proper business records, which meant that the accounts and returns were not accurate. Thus, the appellants or their agents had been negligent.
The appellants claimed that as they had provided all information, there was no case to answer. They claimed that their human rights to a fair and public hearing within a reasonable time under Article 6(1) of the European Convention on Human Rights had been breached. They said that there had been a settlement under TMA 1970, s 54, and that some of the assessments were not properly made.
The Special Commissioner said that it was inappropriate to claim that there was no case to answer. The appellants had to show that the assessments were wrong on the facts. As to the human rights issue, the Commissioner said that the appellants were protected under the common law of England and Wales by their right to natural justice. The only issue arising from the ECHR was the question of unreasonable delay. However, the Special Commissioner had no power to challenge statutory procedure and therefore could not examine whether or not the delays were unreasonable.
With regard to settlement under s 54, the Revenue had tried to reach settlement on various occasions, but nothing had been finalised; thus there was no basis on which to impose a settlement on either side.
With regard to the assessments, the dispute concerned the amount of profits made by the business. The Commissioner could not accept that the records produced established a reliable level of profits and found that the out of time assessments were validly made. The conduct of both the agents and appellants had been careless or negligent.
The Commissioner dismissed the appeals and determined the assessments for all years except in respect of the husband's assessment for 1989-90.
Pooley and another (SpC 525 )
Irregular procedure
HMRC refused the taxpayer's application for a subcontractor's certificate on various grounds including late returns, failure to provide vouchers for payments to subcontractors not holding construction scheme industry certificates for whom he was obliged to deduct PAYE and National Insurance, and late payment of PAYE and National Insurance.
On appeal to the General Commissioners, the taxpayer said that the failures were minor and technical and that he would comply in future. The Commissioners did not agree that the failures were minor and technical and dismissed the taxpayer's appeal.
The taxpayer sought a judicial review, saying that the decision should be quashed because of procedural irregularities at the hearing and that the Commissioners did not give proper reasons for their decision.
In the High Court, the judge observed that HMRC had relied on a written submission which had not been given to the General Commissioners. Furthermore, had it been given to them, it would have represented a major irregularity as it contained additional information adverse to the taxpayer. HMRC had also relied on a case, a copy of which was supplied to the Commissioners but not to the taxpayer. Thus there had been procedural irregularity and the appeal should be reconsidered by another group of Commissioners.
With regard to the Commissioners' actual decision, this had been adequately reasoned.
R (on the application of Corr) v General Commissioners of Income Tax, Queen's Bench Division, 21 September 2005
Unreasonable? Tough!
HMRC imposed a fine of £1,000 on a taxpayer company for failing to file its tax returns on time. The company appealed to the General Commissioners, saying that the fine was inappropriate as although the returns had been late on three occasions, they had covered only two accounting periods. The Commissioners agreed and reduced the fine to £200. HMRC appealed.
In the High Court, the judge said that no provisions qualified the penal provisions in FA 1998, Sch 18 para 17, and a reading of the legislation showed that unreasonableness was not a factor. Thus the General Commissioners had no discretion to reduce the penalty and their decision was wrong in law.
HMRC's appeal was allowed.
CRC v La Senza Ltd, Chancery Division, 30 March 2006
Not minor and technical
The taxpayer applied for its subcontractor's certificate to be renewed. HMRC refused, as the taxpayer had consistently failed over the last three years to pay its PAYE and National Insurance on time. The General Commissioners allowed the taxpayer's appeal, so HMRC appealed.
The judge in the High Court said that the taxpayer had to show that its past failures were not only minor and technical, but were unlikely to occur again. In the instant case, the General Commissioners' findings that the taxpayer's failures were minor and technical was not appropriate. In all but two months out of 34, the taxpayer had failed to pay its PAYE on time and the delays in payments were beyond those that could be held as minor. That the taxpayer, having now been warned about what would happen if it did not meet its obligations, would comply with its obligations, was not enough to satisfy TA 1988, s 565. It was what had happened in the past that mattered at this stage, not what might happen in the future.
HMRC's appeal was allowed.
HMRC v Facilities Maintenance Engineering Ltd, Chancery Division, 31 March 2006
