Roberts v Revenue & Customs [2011] UKFTT 385 (TC)

FTT-Tax
Roberts v Revenue & Customs
[2011] UKFTT 385 (TC) · 2011-06-10
[1]The issue for the Tribunal is whether it should exercise its power under Taxes Management Act 1970 section 49H(3) and give permission to Mr Darren L Roberts to notify certain appeals to the Tribunal. The background circumstances[2]Before the new review and appeal regime was introduced by the Transfer of Tribunal Functions Order 2009 (“the 2009 Order”), which added sections 49A-H to the TMA with effect from 1 April 2009, Mr Roberts had made in time appeals against a closure notice and three discovery assessments. We refer to these as “the Tax Assessments”.[3]Those appeals had not been referred to the General Commissioners by 31 March 2009 and on 3 April 2009 HMRC offered Mr Roberts a review of the tax assessments. In that letter HMRC stated that their view remained unchanged and went on say that if Mr Roberts did not want a review he should notify his appeals to the Tribunal Service.[4]Mr Roberts did not ask for a review of the Tax Assessments. He sought to refer the matter to the Tribunal on 19 April 2010.[5]In June 2009 a penalty determination was issued. It was appealed by Mr Roberts within 30 days. We refer to this as “the Penalty Assessment”.[6]On 8 September 2009 HMRC wrote to Mr Roberts re-stating their view of the matter, offering a review of the Penalty Assessment and telling him that if he were to decline to accept a review he should, within 30 days, refer the matter to the Tribunal.[7]Mr Roberts did not ask for a review of the Penalty Assessment. He sought to refer the matter to the Tribunal on 19 April 2010. The statutory background[8]In the case of both the Tax Assessments and the Penalty Assessment the common features are:(i) In time notices of appeal had been given to HMRC;(ii) An offer of a review supported by HMRC’s view of the matter had been made after 1 April 2009;(iii) There have been no acceptances of HMRC’s offers and(iv) There had been no notification of the appeals to the Tribunal within the “acceptance period” of thirty days.[9]The rules governing reviews and appeals (sections 49A to 49H) took effect on 1 April 2009. Section 49C applies where HMRC make an offer to review the matter in issue. Subsection (2) requires that the offer be accompanied by notification of HMRC’s view of the matter. If the offer is accepted (within 30 days) HMRC must review the matter (subsection (3)); and if the offer is not accepted and there has been no notification of the appeal to the Tribunal, the matter is treated as if a “section 54 agreement” had come into being. The rules governing notification of the appeal to the Tribunal, where a review has been offered but not accepted, are found in section 49H.[10]Section 49H(2) enables a taxpayer to notify the Tribunal within the period of 30 days. Subsection (3) provides that, if that period has ended, “the Appellant may notify the Tribunal only if the Tribunal gives permission”. The circumstances of the present application for permission to notify the appeals to the Tribunal[11]An account of the factual background to this Application was given by Mr M Novakovic whose firm had acted for Mr Roberts since November 2001. After a while Mr Roberts had ceased to use their services because he could not afford the fees; Mr Roberts had then submitted his own tax returns.[12]By 2005 Mr Roberts was running a fast-growing business valeting cars. Mr Novakovic’s firm was re-engaged. A company was said to have taken over the business. Following an HMRC visit concerned with VAT, a VAT assessment for some £39,000 was raised on Mr Roberts himself; this has been disputed on the grounds, among other things, that the company should have been assessed.[13]Mr Roberts was then assessed (for the years 2002-5) to a tax liability of some £46,000 and a penalty. HMRC then announced that an enquiry was to be held into his 2006 return. Mr Roberts engaged a different firm of accountants; there was apparently a lack of co-operation in the course of the enquiry and estimated assessments were issued.[14]When the Tax Assessments for 2002-5 were issued in November 2008 they were, as noted, appealed to HMRC within the statutory thirty day period. In April 2009 HMRC wrote to Novakovic & Co explaining that from 1 April it would no longer be possible to appeal to the General Commissioners. The letter enclosed a leaflet outlining the new procedure. The letter stated that Mr Roberts had the option of requiring a review before going to the new Tribunal.[15]A different firm of accountants were engaged to deal with the enquiry. A winding up petition had by then been issued. Negotiations had taken place as to how the company should pay the tax due from it.[16]Mr Roberts, apparently, was under the impression that his personal assessments had been reduced to nil. Novakovic & Co wrote to HMRC on 26 June 2009 confirming that another firm had, in January 2009, been appointed to deal with Mr Roberts’ affairs. Novakovic & Co, in the same letter, expressed the view that the original appeal against the assessments was adequate, “trusting that the tax had been held over”. Mr Novakovic then took instructions from Mr Roberts who, apparently, had been under the impression that the matter had been settled following the winding up of the company; he had apparently confused the VAT liability with his own income tax liabilities.[17]From September 2009 onwards Mr Roberts had had various opportunities to provide the information to enable the appeals to be determined. Some, but not apparently enough, information had been provided by April 2010.[18]There was evidently a confusion on the part of Mr Roberts as to the progress of his “appeals”. The underlying causes were the complications of having two possible traders (i.e. Mr Roberts himself and company), two different taxes being assessed and the concurrence enforcement proceedings taking place against the company. The problems were aggravated by the existence of two firms of accountants acting in effect for one unsophisticated individual.[19]One certain feature is that the Tax Assessment appeals were duly lodged in time with HMRC on 10 April 2008 and receipt was acknowledged by HMRC on 17 December 2008. The letter of 17 December confirmed that all relevant amounts would be stood over and if the amounts could not be agreed “the assessments would need to be determined at a Commissioners’ hearing.” Thus, from 10 December 2009 Mr Roberts’ tax position in relation to the Tax Assessments was protected. No enforceable liability could exist until either the Commissioners had made a determination or a section 54 agreement had been reached.[20]According to HMRC the protection was removed as from 1 April 2009 when the new regime was introduced by the 2009 Order. The new regime, as explained, required that HMRC offer a review; and, if within 30 days this has been refused and no notification of the appeal has been made to the Tribunal, section 54 takes over and the liabilities immediately become enforceable. We assume (without, we stress, deciding the point) that HMRC’s explanation is correct. Conclusions[21]On the basis that the 30 day acceptance period (running from 3 April 2009 for the Tax Assessments and 8 September 2009 for the Penalty Assessments) has long since ended, Mr Roberts may still notify the appeals to the Tribunal “only if the Tribunal gives permission”: see section 49H. The Act (Taxes Management Act 1970) contains no criteria as to what justifies a grant of permission. We are not here concerned with the statutory conditions set out in section 49(1) governing the Tribunal’s power to give permission to appeal where the notice of appeal has been submitted late; these include the condition that HMRC be satisfied that there was a reasonable excuse for not giving the notice of appeal in time. Here, as noted, the appeals were all lodged with HMRC in time. Our function, by contrast to that found in section 49, is to determine whether to give permission for the notification of the appeal to the Tribunal notwithstanding that notification has been made outside the 30 day acceptance period.[22]For that purpose the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 cover the exercise of the Tribunal’s powers. Rule 5(3)(a) of the Tribunal Rules gives the Tribunal discretion to “extend or shorten the time for complying with any rule, practice direction or direction, unless such extension or shortening would conflict with a provision of another enactment setting down the time limit”. Tribunal Rule 20(4) provides for the Tribunal to apply Tribunal Rule 5(3)(a) to allow for an extension of time for the filing of an appeal. In considering whether to extend the time, the Tribunal is required to seek to give effect to the overriding objective set out in Tribunal Rule 2. Paragraph 7(3) of Schedule 3 to the 2009 Order gives a power to like effect: see paragraph 26 below.[23]We, in common with the Tribunal in Leliunga (Judge Nicholas Aleksander and Phillip Gillett) will use Rule 3.9(1) of the Civil procedure rules 1998 as our guide. So far as is directly relevant, that reads as follows:
“(1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order the court will consider all the circumstances including: (a) the interests of the administration of justice; (b) whether the application for relief has been made promptly; (c) whether the failure to comply was intentional; (d) whether there is a good explanation for the failure; (e) the extent to which the party in default has complied with other rules, practice directions, court orders and any relevant pre-action protocol; …”
In applying those words we start with the observation that, as the law stood when the Tax Assessments were imposed, Mr Roberts was absolutely compliant. From 10 December 2009 he was protected in the sense that all tax liabilities arising from the Tax Assessments were suspended pending the outcome of the appeals. The appeals, if not settled by a section 54 Agreement were to be referred at an appropriate time to the Commissioners for their determination. Then the 2009 Order, with effect from 1 April 2009, introduced section 49A-H of TMA. The result was that if (as happened on 3 April) HMRC chose to offer Mr Roberts a review and to express a view of the matter in question, Mr Roberts’ protection was removed. Protection could only be reinstated if Mr Roberts either accepted the offer by 2 May 2009 or notified the Tribunal by 2 May 2009 or later with the Tribunal’s permission.[24]So far as Mr Roberts was concerned his tax affairs were complicated. We have explained the circumstances. He thought he was protected because he had lodged his appeal and consequently he had access to justice as of right. Had he read the 2009 Order and understood the implications of the HMRC leaflet explaining the introduction of the new regime, he would have discovered that he could lose his right to appeal (and the consequent protection) if after 1 April 2009 HMRC chose to offer him a review and he chose to ignore it without also notifying the Tribunal of his appeal – and all within the 30 day acceptance period.[25]In those circumstances it would, we think, be wrong to refuse permission to Mr Roberts to notify his appeal to the Tribunal. It was not, we observe, only Mr Roberts who found things complicated. HMRC, when apologising for the delayed response to Mr Roberts’ appeal against the Penalty Assessment, used the changes brought about by the 2009 Order as excuses for their own delay. (In their letter of 8 September 2009 an apology for the delay was explained in these words- “Matters were complicated by the switch from Commissioners hearings to the new Tribunals for appeals against decisions of HMRC.”) We recognise that it was tough for HMRC; but it is even tougher for an unsophisticated taxpayer such as Mr Roberts. We think that Mr Roberts, who did not intentionally fail to notify the Tribunal of the Tax Appeals by 2 May, could reasonably expect that the protection given by his own compliant appeals in December 2009 would continue. In our view, therefore, it is in the interests of the administration of justice that permission under section 49H should be given.[26]We note in this connection paragraphs 6 and 7 of Schedule 3 to the 2009 Order. The Tax Appeals were “current proceedings” at the time of the commencement date (1 April 2009). Paragraph 7(3) enables this Tribunal to give “any direction to ensure that [current] proceedings are dealt with fairly and justly”. The present is an occasion that calls for such a direction and on that basis we direct that the Tax Assessment appeals be heard by this Tribunal.[27]Turning now to the Penalty Assessments, we observe that Mr Roberts appealed in time. The penalty notice was issued after 1 April 2009; the appeal was lodged after 1 April 2009. There were therefore no complications arising from the switch from the old regime to the new system. Mr Roberts chose not to accept the offer of a review made by HMRC’s letter of 8 September 2009 and he failed to notify the Tribunal by 7 October 2009. Consequently he lost his right to appeal (as of right to the tribunal). We think that, here too, we should give permission under section 49H. The circumstances were complicated. The penalty relates to the same facts as underlie the tax appeals. It would be strange if the Tax Appeals were to succeed but no corresponding adjustment could be made to the Penalty Assessment (which, strictly, will have become the subject of a section 54 agreement). The right to notify a penalty appeal to the Tribunal, where the appeal itself has been made in time, should in principle be protected unless there are good reasons to the contrary.[28]We give permission for all appeals to be notified to the Tribunal. SIR STEPHEN OLIVER QC TRIBUNAL JUDGE RELEASE DATE: 10 June 2011