Tipping v Revenue and Customs (INCOME TAX/CORPORATION TAX : Pension scheme) [2017] UKFTT 0485 (TC)

FTT-Tax
Tipping v Revenue and Customs (INCOME TAX/CORPORATION TAX : Pension scheme)
[2017] UKFTT 0485 (TC) · 2017-03-21
[1]This appeal, made by way of a Notice of Appeal dated 26 February 2016, concerns HMRC's decision of 23 October 2015 (upheld at departmental review on 28 January 2016) to refuse to accept a late notification by the appellant of his intention to rely on Paragraph 12 of Schedule 36 of the Finance Act 2004 (a “late application for enhanced protection”).[2]The underlying legislation is not in dispute, and we do not consider it necessary to set out the substantive details of the lifetime allowance charge introduced by the 2004 Act. Late evidence[3]We heard this appeal on 21 March 2017. Counsel for HMRC had rightly complained in his Skeleton Argument (dated 7 March 2017) about missing documents, the existence of which could reliably be inferred from other (disclosed) documents. In accordance with the Registrar's directions dated 25 June 2016, disclosure was to have been completed by 5 August 2016.[4]Some of Mr Bradley's complaints fell away when 28 pages of further documents were produced on the Appellant's behalf at the outset of the hearing. Mr Bradley did not object to the inclusion of these into evidence before us, and we decided, in the interests of fairness, to so admit them.[5]However, during the course of the hearing, and more particularly during the course of Mr Tipping's oral evidence, it became clear that Mr Tipping still had other documents, which had passed between him and his advisers, St James' Place ('SJP') and which had not been disclosed. Mr Tipping's explanation was that he did not realise that those documents would be relevant. Unfortunately, those other documents were not available at the hearing.[6]On 31 March 2017, the Applicant's representatives, by way of an email, applied for further documents to be put before the Tribunal for us to consider as part of our deliberations. It was acknowledged that those documents ought to have been provided beforehand and (at the latest) at the hearing. There was no explanation going beyond what Mr Tipping had already told us why these documents had not been disclosed in advance of the hearing, particularly (as was suggested to have been the case) the documents were supportive of his appeal.[7]The Tribunal was not directed to any particular power, other than its 'general case management powers'.[8]On 4 April 2017, HMRC responded that it opposed the application. It contended that the documents were emerging 10 days after the hearing and more than 200 days after the date for disclosure. HMRC also pointed to correspondence on 21 November 2014 and 29 April 2015 in which the appellant and his representatives had been asked whether there was any further documentation. Latterly, on 15 July 2015, the appellant's representatives responded that there were not. Unfortunately, as matters turned out, that was not correct. It remains unclear how the appellant's representatives came to form the belief that there was nothing further to disclose, which belief was sufficiently firm that they were able to assert the same, in response to a direct inquiry, and without any qualification, to HMRC.[9]HMRC did not take any substantive point about the content of the 'new' (sic) documents, or whether (for instance) they demonstrated anything which went materially to the questions of reasonable excuse or delay.[10]We have regard to the overriding objective, set out in Rule 2 of the Tribunal's Rules. Rule 2(3) requires us to seek to give effect to the overriding objective when we exercise any power under the Rules. We note the reminder, given the force of law through its encapsulation in Rule 2(4), that parties must themselves help the Tribunal further the overriding objective.[11]We also have regard to the binding guidance which has been given by the Court of Appeal on the matter of compliance with directions. In BPP Holdings v HMRC [2016] EWCA Civ 121 , the leading judgment was given by the Senior President of Tribunals. Having considered the approach to compliance in our sister civil jurisdictions, he remarked:
"It should not need to be said that a tribunal's orders, rules and practice directions are to be complied with in like manner to a court's. If it needs to be said, I have now said it ... A more relaxed approach to compliance in tribunals would run the risk that non-compliance with all orders including final orders would have to be tolerated on some rational basis. That is the wrong starting point. The correct starting point is compliance unless there is good reason to the contrary which should, where possible, be put in advance to the tribunal. The interests of justice are not just in terms of the effect on the parties in a particular case but also the impact of the non-compliance on the wider system including the time expended by the Tribunal in getting (parties) to comply with a procedural obligation. Flexibility of process does not mean a shoddy attitude to delay or compliance by any party."
[12]Whilst we have a discretion to admit late evidence, we decline to exercise it in favour of the Appellant in this case in relation to the documents provided on 31 March 2017. Those documents could and should have been disclosed sooner. Mr Tipping had been professionally advised and represented throughout this appeal. His failure to have disclosed these documents was serious and significant, and there was no good reason for it. The documents were self-evidently relevant in an appeal which obviously turned in large measure of what Mr Tipping knew, and when. The appeal had been conducted, by both parties, on a particular footing, and it would be unfair (especially taking into account HMRC's repeated inquiries as to whether there were more documents) to admit the documents into evidence. HMRC was entitled to rely on the assurance which it had been given by the Appellant's representatives. Accordingly, we have had no regard to those documents in our determination of this appeal. This Appeal[13]The final date for giving notice of intention was 5 April 2009: see Regulation 4(4) of the Registered Pension Schemes (Enhanced Lifetime Allowance) Regulations 2006 : SI 2006/131[14]It was not in dispute that Mr Tipping's notification was not received until on or around 12 December 2014 and was therefore late.[15]However, a taxpayer may still give an effective notification (that is, a notification which HMRC are bound to consider) after the closing date provided that the taxpayer has a reasonable excuse for not giving the notification on or before the closing date and the notification is given without unreasonable delay after the reasonable excuse ceased: Regulation 12[16]The test under Regulation 12 therefore has two elements, which are cumulative. Both must be satisfied in order for the taxpayer to take advantage of Regulation 12. If Mr Tipping did not have such a reasonable excuse, then his appeal fails at the first hurdle, and must be dismissed. But, if he did have a reasonable excuse, then we must go on to consider when that reasonable excuse ceased, and whether his notification was thereafter made "without unreasonable delay."[17]We remind ourselves that the appellant bears the burden of satisfying us that he qualifies within the meaning and effect of this dispensing provision. We also remind ourselves that the usual civil standard of proof, namely the balance of probabilities, applies. The Facts[18]Mr Tipping provided a witness statement dated 31 August 2016. This largely summarises, and is consistent with, a long letter which he wrote to SJP on 21 February 2016. He also gave oral evidence. We accept his evidence as truthful. On the basis of his evidence, and the other information and materials placed before us in the hearing bundle, we make the following findings of fact.[19]Since October 2002, Mr Tipping had been a client of a firm of financial and pension advisers, Jennie Shepherd Associates ('JSA') which was part of St James Place Wealth Management ('SJP'). The eponymous Jennie Shepherd was a partner of SJP.[20]Mr Tipping had been the managing director of a company providing high-end interior contracting and shop-fitting services. He had substantial pension funds, held with a number of providers. He had decided to take early retirement, and did so in July 2003. He and his wife Sandra moved lock stock and barrel from Northamptonshire to Cornwall where they had found an old cottage to restore as a retirement project. As part of his retirement, Mr Tipping took a large one-off payment from the company, which was directed into his pension funds, thereby adding very considerably to their value. At the time, he was about 55 years old.[21]JSA, through one Dale Johnson, had given extremely detailed pensions advice to Mr Tipping in an 8 page letter on 28 April 2003, which was about the same time as his last pension contribution of any substance.[22]JSA continued to advise Mr Tipping until it ceased trading in April 2012. The conduct of Mr Tipping's affairs and his pension was passed on to another adviser within SJP, Mr Hames of Hames Associates.[23]Mr Tipping met Mr Hames on or about 10 February 2014, and was provided with some notes relevant to the issue of fixed protection, albeit generally and perhaps in relation to a different scheme.[24]Having read those, Mr Tipping wrote to Mr Hames on 25 March 2014 to complain that no application for enhanced protection had been made. Discussion Reasonable Excuse[25]In Perrin v HMRC [2014] UKFTT 488 (TC) , the Tribunal (Judge Redston) remarked that the task for the Tribunal involved in a reasonable excuse appeal "... combines the tasks of judge and jury: we must decide whether “there is a reasonable excuse for the failure.” We agree … that the correct way of doing this is to ask: “was what the taxpayer did a reasonable thing for a responsible trader conscious of and intending to comply with his obligations regarding tax, but having the experience and other relevant attributes of the taxpayer and placed in the situation that the taxpayer found himself at the relevant time, a reasonable thing to do?”: see Paras [99] - [100][26]We agree with that succinct analysis, and that is the basis upon which we approach this appeal. Hence, when we refer to “the reasonable taxpayer” we are using that phrase as shorthand for “a responsible person with the same experience and other relevant attributes of the taxpayer and placed in the same situation as the taxpayer at the relevant time”.[27]The test is reasonableness, and no higher or lower standard needs to be applied. The mere fact that something that could have been done has not been done does not, in and of itself, necessarily mean that an individual's conduct in failing to act in a particular way is to be regarded as unreasonable. It depends on the circumstances.[28]HMRC accepts, as a matter of principle, that a taxpayer's reliance on a specialist can amount to a reasonable excuse.[29]Nonetheless, it is also correct that such reliance is not a trump card which invariably constitutes a reasonable excuse. The nature and extent of the reliance has to be weighed up in the circumstances of each individual appeal. That is the exercise which was conducted by other compositions of this Tribunal in Adrian Platt v HMRC [2011] UKFTT 606 (TC) (Judge Berner and Mr Adams FCA) (dismissing the appeal); Charles Irby v HMRC [2012] UKFTT 291 (TC) (Judge Walters QC and Ms Chong FRICS) (allowing the appeal); Gordon Yablon v HMRC [2016] UKFTT 814 (TC) (Judge Richards) (dismissing the appeal); and John Hughes v HMRC [2016] TC/2016/01652 (Judge Chapman and Miss Stott) (dismissing the appeal). Given the fact-sensitive nature of the exercise for the Tribunal at first instance, it is entirely unsurprising that different compositions of this Tribunal have reached different conclusions. None of those decisions bind us albeit we give them due regard. Having done so, in our view, none of those decisions articulate any definitive test to be applied, and both parties' attempts to draw parallels with non-binding decisions where the outcome happens to match the one which that party seeks in this appeal are unproductive.[30]We reject Mr Bradley's submission that, if Mr Tipping is to make good his case as to reasonable reliance, 'he must at least show that the advice was indeed negligent'. We disagree. Neither the primary nor secondary legislation mandates the primary decision maker (HMRC) or us (as the appellate body), whether expressly or by necessary implication, to conduct a surrogate or quasi-professional negligence trial against SJP. SJP are not a party to the appeal, and were not represented (albeit we learnt that SJP were involved to the extent of paying for Mr Tipping's representation). Nor do we detect support for such an approach in the decisions to which we have already referred.[31]If HMRC were right in this submission, then we would have to make primary findings as to the extent of SJP's duty, breach, causation and loss. Those are not matters within our jurisdiction. Moreover, and if the proposition so put on HMRC's behalf were right, then there could be no appeal before us unless and until there was either an admissible admission of liability by the professional upon whom reliance had been placed, or a judicial finding, binding on us, of the same. This cannot be right, and it seems to run clearly counter to the way in which the 2006 Regulations are framed, and to the way in which appeals to this Tribunal are advanced.[32]In our view, the position is much simpler. What Mr Tipping needs to show us is that he satisfies each of the two limbs of the statutory test.[33]As the former managing director of a substantial trading company, Mr Tipping has a commercial background and commercial experience. This background and experience could, at first blush, lead to an assumption that he would have taken a critical and interventionist approach to his pension funds sufficient to have allowed him to identify, well in advance of 2014, what had gone wrong. However, our impression of him, having heard him give evidence and thus having had a good opportunity to assess him, was that he is an individual who, despite that background and experience, in reality (and perhaps a little surprisingly) came to put a very considerable degree of trust and confidence in his professional advisers.[34]We were struck by how this trust and confidence appeared unshaken notwithstanding what had plainly been a series of bad mistakes on the part of SJP and various of its partners over the course of several years. Those mistakes had resulted in Mr Tipping having to make and pursue this appeal, including the need for him to come from Cornwall to Manchester to give evidence. Against that background, it was striking that Mr Tipping did not seek to venture any criticism of SJP in his oral evidence, although it would have been very easy, and justifiable, for him to have done so. Whilst the Notice of Appeal filed on his behalf was blunt in its criticism of SJP:
" We ... believe the duty of care ... was completely breached by SJP"
Mr Tipping's evidence was that he thought that he had had " really good advice all the way through " from SJP, and that " all the other financial dealings " with them had been " brilliant ". He described Mr Hames as " great" and said that he still has " every confidence " in him. He said that the matter of the failure to have applied for enhanced protection was " the only isolated thing which I'm not perfectly happy with ." We regarded this evidence as unvarnished and credible. It was far from self-serving.[35]This is an important feature in this appeal since it shows us, as a Tribunal empowered to find facts, that one of Mr Tipping's attributes, relevant to assessing the reasonableness of his excuse, was the degree of confidence and trust - which in our view could fairly be said to have bordered on blind faith - in SJP.[36]This was not an intrinsically unreasonable stance for Mr Tipping to have adopted. SJP held themselves out as professionals. The service which SJP was providing to him was described as 'a fully managed service'. As part of that service, so described, Mr Tipping was entitled to expect advice, and moreover was entitled to expect that the advice was comprehensive and correct. His evidence, which we accept, was that he would have expected SJP to have contacted him if there were a change in the law in some way which affected his pension. We also accept his evidence that SJP was aware of the extent to which he was relying on them for their advice.[37]For the sake of completeness, it does not seem to us to be relevant (or, even if relevant, determinative) that this is a case in which (unlike a penalty case) the taxpayer is seeking to assert a claim which would have been entirely open to him without any obstacle before the statutory closing date, and which claim, had it been made timeously, would simply have protected rights which had already accrued.[38]We consider that, in relying on SJP, and taking the above into account, Mr Tipping had a reasonable excuse, and he meets the first limb of the test. Delay[39]We therefore turn to the second limb of the test. The language of Regulation 12 is careful. It contemplates that there will have been delay, but that is qualified by the requirement of reasonableness. The Regulation gives no deadline or longstop. Nor is there any hard and fast scale of when (reasonable) delay turns to unreasonable delay. So, again, each case must be assessed on its own facts.[40]HMRC rightly point out that there is a distinct paucity of contemporary documentary evidence of the kind which one would expect to have been produced by a firm of ostensibly competent financial professionals such as SJP. In particular, there are no attendance notes, or notes of advice, which could have gone to the issue of when Mr Tipping first became aware that a late application could be made. In particular, there is no contemporary note of the important meeting with Mr Hames in February 2014. This is a surprising omission given that the appellant bears the legal and evidential burdens on this issue.[41]But, in our view, there is sufficient evidence (for the sake of clarity, being the documents in the original bundle, and the documents admitted on the morning of the hearing, but not the documents supplied on 31 March 2017), coming both from Mr Tipping and SJP which, read together, allow us, for the purposes of this appeal, to reconstruct the chronology and sequence of events with adequate fidelity.[42]The assessment of the excuse, and its reason, which exercise we have conducted above, must also in our view, play some part when it comes to assessing whether the delay was reasonable.[43]We find that Mr Tipping was given sufficient material by SJP, during an annual review with Mr Hames on 10 February 2014, to allow him to work out that there had been some error in relation to enhanced protection (although it is fair to say that Mr Tipping does not seem to have absorbed the information straight away). But, even if the material which he was given related to a different scheme (since that material was not put before us in evidence, we cannot make any finding in that regard) Mr Tipping nonetheless became alive to the issue of enhanced protection in general at that point in time.[44]Mr Tipping's oral evidence was that Mr Hames seemed surprised that Mr Tipping had no fixed protection, and explained to him what it was. We accept that evidence. It is consistent with the correspondence, and especially Mr Tipping's letter of 25 March 2014.[45]Accordingly, we take 10 February 2014 to be point at which the reasonable excuse ceased, and therefore that is the start point for assessment of the delay.[46]Mr Tipping was not inactive after 10 February 2014. About 5 weeks later, on 25 March 2014, he wrote to Mr Hames to complain. He asked Mr Hames "to instigate an investigation into why I was not advised to apply for the earlier protection, what financial implications this has, and what actions can be taken" (emphasis added by the Tribunal). We regard this as a reasonable step for Mr Tipping to have taken, given his state of knowledge at the time, which, deduced from the letter, did not include knowledge as to what, if anything, could be done to put the situation right.[47]That complaint took even longer - almost 2 months - for SJP to process. That period cannot be counted against Mr Tipping. He was waiting for an answer from his advisers.[48]SJP's response is dated 20 May 2014. It would be fair to say that the response to the complaint is somewhat opaque, especially in the way in which it addresses whether a recommendation was or was not made to Mr Tipping in relation to enhanced protection. Although it is a long letter, it does not really come to grips with the point at all. To our eyes, it conspicuously swerves the thrust of the complaint by seeking to reassure Mr Tipping that his pension fund was still performing well notwithstanding the absence of enhanced protection. But that was not an answer to the question which he had asked.[49]Mr Tipping told us in evidence that he was " really annoyed" with that letter. We can see why. Mr Tipping's letter of 25 March 2014 had concluded with an express request for advice as to what could be done to remedy the situation. As SJP should have known, but apparently did not, time was already running against Mr Tipping. In his oral evidence he told us that, in his view, SJP's Ms Matthews " had been tasked with sorting it out ". That was right: she had been so tasked. He told us that she had not 'sorted it out'. That was also right: she had not. Unfortunately, Mr Tipping's letter does not seem to have prompted anyone at SJP to actually do anything at the time in relation to making a late application. It seems that SJP was still labouring under some apprehension, rightly or wrongly, that nothing could usefully be done.[50]There is then a delay of 3 and a half months before Mr Tipping took the matter again on 7 July 2014. So, the total delay to this point is just under 5 months, of which 2 months was down to SJP. But we have to assess this delay against what Mr Tipping knew and did not know. Crucially, we find that Mr Tipping did not know, even on 7 July 2014, since he had not been expressly made aware, that a late application could be made. His question as to what could be done had not been answered. He complained, understandably, as to the manner in which his earlier complaint had been dealt with. However, instead of going elsewhere, he asked SJP to reconsider its comments and conclusion and to inform him appropriately. It seems to us that was not an unreasonable thing for Mr Tipping to have done. He had set a particular process in motion. It had not been completed to his satisfaction and he was endeavouring to drive it to some conclusion.[51]The periods of delay between 10 February and 25 March (6 weeks) and 20 May and 7 July (6 weeks) were indeed down to Mr Tipping, but he said in evidence that, during this period, his wife had been very ill, and that he was " not on top of the agenda". That evidence was obviously truthful, and Mr Bradley, with commendable sensitivity, did not seek to challenge it.[52]SJP then again took time (10 days) to respond. That period cannot be held against Mr Tipping.[53]Mr Tipping was not expressly made aware that he could make a late application until a letter from SJP dated 17 July 2014. That letter (misleadingly headed 'Without Prejudice', although it did not seem to us that it was genuinely privileged since it did not contain any proposals to resolve the dispute) was the first documented mention to Mr Tipping that it was possible to apply retrospectively, although, as we have found, he was sufficiently aware that there was a problem in general in February to support our finding that the clock began to run then, and not in July.[54]But the letter of 17 July 2014 does not answer the point, since other aspects of that letter are, to our eyes, troubling. SJP, despite holding themselves out as specialist pensions managers, were apparently of the belief that the services of "a specialist company" would be needed in order to fill in the form. This is suggestive - we cannot put it any higher than that -(i) that SJP did not apparently even realise until 17 July 2014 that a retrospective application was possible (albeit, at that point, the legislation had been in force for almost 8 years) and(ii) (again, with the same qualifying remark) that SJP did not even know how to fill in the form, which is a relatively simple one.[55]Given that SJP had, objectively, gotten it so badly wrong up till that point, it is fair to say that Mr Tipping does not seem to have asked himself or reflected as to whether it was still reasonable to trust in SJP to put it right. From our vantage point, it seems that a person less fully trusting in the competence of their advisers than we have found Mr Tipping to have been could perhaps have read the letters of 25 March 2014 or 17 July 2014 as indicating the need to seek a second opinion, or to take matters into their own hands. Whilst Mr Tipping did neither of those things, we are satisfied that he did not personally detect any cause for real concern in those letters, and we are satisfied that it was reasonable for him to have advanced and pursued matters in the way that he did. He explained to us, and we accept, that he was " quite happy to go along" with SJP's suggestion.[56]We are satisfied that the letters have to be read by the Tribunal carefully, but in the light of the circumstances which are known, objectively, to have pertained at the time. They should not be read over-forensically, with the benefit of hindsight, or as if we were conducting a quasi-professional negligence action.[57]We consider that the reasonable taxpayer in Mr Tipping's position, possessed of his attributes, would perhaps not have been entirely reassured by those letters, and perhaps would have been frustrated by them, but would nonetheless have continued to leave the matter of notification in the hands of their advisers, in the belief that they would sort it out. The delay so occasioned was not therefore unreasonable.[58]SJP did not cover themselves with glory. It was not for another two months - on or about 8 September 2014 - that SJP finally attempted to remedy the situation. A form APSS200 ('Protection of Existing Rights') was completed by someone at SJP and was signed by Mr Tipping, but was not dated. Mr Tipping told us, and we accept, that he was asked to leave it undated, and had assumed that SJP would date it when he sent it back to them and they would forward it to HMRC. But, as far as Mr Tipping was concerned, the application for protection had been made. He put the matter of filing with HMRC in the hands of SJP. We accept his evidence that he felt that things "had been put in progress as much as they could at that stage." He said that he could not have done the process by himself and we believed him.[59]On 1 October 2014, Independent Tax wrote to HMRC that a late application had been submitted, and enclosed a photocopy of the signed but not dated form. They asked for confirmation that the completed APSS200 had been received, and asked for an indication of when the response would be received.[60]HMRC did not respond to that until 21 November 2014: 7 weeks later. That delay cannot be attributed to Mr Tipping or his advisers. They were reasonably waiting for an answer. Receipt of the copy form sent under cover of the letter of 1 October 2014 was acknowledged, but HMRC said that they had not received any form from SJP, or earlier. It was also asserted that Mr Tipping had not completed the right boxes on the form.[61]Despite being told on 3 December 2014 that HMRC had not received the form, SJP did not send the completed form, now dated 6 December 2014, until 12 December 2014.[62]In our view, the true period of delay is therefore from 10 February 2014 to 12 December 2014 - in round terms, 10 months.[63]Significant proportions of that time, as we have outlined above, were taken up by delay on the part of SJP which cannot be attributed to Mr Tipping.[64]The date of notification cannot be September or October 2014 when the undated form was sent. That is because Regulation 10(3) (as substituted by the Registered Pension Schemes (Enhanced Lifetime Allowance) (Amendment) Regulations 2006 (SI 2006 No 3261)) requires that the notification must be signed and dated. The Regulation is in mandatory form.[65]However, and despite the operation of Regulation 10(3), we are not barred from considering what had in fact did happen, and the fact that Mr Tipping had signed the form, and thereby (save for the act of dating), had done all that was in his power to do in early September 2014 (that is, less than 2 months after first being made expressly aware that a late notification could be made). We can also take into account that he genuinely continued to believe, until early October, that the notification had been sent. Those are all factors, albeit not decisive ones, which play a part in our overall assessment of the delay and whether it was reasonable.[66]Taking the above matters in the round, we do not consider the delay overall, in the circumstances, to have been unreasonable. The second limb of the test is met. Conclusion[67]Accordingly, we allow this appeal.[68]In accordance with Regulation 12(8) of the 2006 Regulations, we direct that HMRC consider the information provided by Mr Tipping in his notification signed and dated 6 December 2014.[69]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Dr Christopher McNall TRIBUNAL JUDGE RELEASE DATE: 12 June 2017

Cited in 2 later judgments