[2011] UKFTT 361 (TC)

TC01216

Appeal number TC/2010/07832

APPEALS – application for permission to bring appeal outside the time limit for doing so – permission refused

FIRST-TIER TRIBUNAL

TAX 

	MR JACK HAROUNI		Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

                        TRIBUNAL: 	Dr Christopher Staker (Tribunal Judge)
					DR MICHAEL JAMES (Tribunal Member)

Sitting in public in London on 10 March 2011

The Appellant in person

Mr Phil Jones for the Respondents

DECISION
Introduction
1.	This appeal was heard in London on 10 March 2011.  The Tribunal gave its decision orally at the end of the hearing.  The parties agreed pursuant to Rule 35(3) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 that is it unnecessary for this decision to include full or summary findings of fact and reasons for the decision.  The Appellant subsequently requested full reasons for the decision, which are now provided. 
2.	At the hearing, Mr Jones who represented HMRC submitted that it was unclear exactly what were the decisions of HMRC against which the Appellant was seeking to bring a late appeal.  In the course of the hearing it was clarified by the Appellant that he was seeking only to bring a late appeal against a closure notice issued by HMRC on 22 October 2009 in respect of tax year 2003/04.  It further emerged at the hearing that the difference between the amount of tax for that year in the closure notice, and the lesser amount of tax previously returned by the Appellant in his tax return for that year, related solely to capital gains tax arising from the disposal of a property known as “The Paddocks”.  If granted permission to appeal out of time against the closure notice, the Appellant would dispute the liability for this capital gains tax.
The relevant legislation
3.	Section 31 of the Taxes Management Act 1970 (the “TMA”) provides for the possibility of an appeal against any conclusion stated or amendment made by a closure notice.  Section 31A(1) of the TMA provides that notice of an appeal must be given in writing within 30 days of “the specified date”.  Section 31A(3) of the TMA provides that in the case of an appeal against a closure notice, the “specified date” is the date on which the closure notice was issued.  Section 31A(5) provides that the closure notice must specify the grounds of appeal.
4.	Section 49 of the TMA provides for the circumstances in which a notice of appeal may be given after the relevant time limit.  The first circumstance is where HMRC agrees, which HMRC is required to do upon written request if HMRC are satisfied that there was a reasonable excuse for not giving notice of appeal before expiry of the relevant time limit, and that the request has been made without unreasonable delay after the reasonable excuse ceased.  The second circumstance in which a notice of appeal may be given after the relevant time limit is where HMRC have not agreed, but the Tribunal has given permission.  Unlike in the first circumstance, the Tribunal when deciding whether to give permission is not confined to a consideration of whether the Appellant has a reasonable excuse for not giving notice of appeal before expiry of the relevant time limit, but may consider and weigh all of the circumstances of the case as a whole.
5.	Section 118(2) of the TMA further provides as follows:
(2)	For the purposes of this Act, a person shall be deemed not to have failed to do anything required to be done within a limited time if he did it within such further time, if any, as the Board or the tribunal or officer concerned may have allowed; and where a person had a reasonable excuse for not doing anything required to be done he shall be deemed not to have failed to do it unless the excuse ceased and, after the excuse ceased, he shall be deemed not to have failed to do it if he did it without unreasonable delay after the excuse had ceased.
The hearing, evidence and arguments
6.	At the hearing, the Appellant appeared in person and was unrepresented.  In the circumstances, Mr Jones who represented HMRC agreed to present the HMRC case first.
7.	Mr Jones provided a legislation bundle and a correspondence bundle, and other documents.  He also very helpfully provided a copy of his “Speaking brief for the Respondents”, which contained the detailed submissions of HMRC, which need not be repeated in full in the present decision.
8.	The HMRC case is in brief as follows.
9.	HMRC issued the Appellant with tax returns for the years 2002/03, 2003/04 and 2004/05 on 13 April 2007.  The deadline for their submission was 12 July 2007.  They were submitted late on 10 September 2007.  The 2003/04 and 2004/05 returns were then the subject of notices of enquiry under s.9A of the TMA on 25 April 2008.  In order to progress the enquiries, HMRC had to use its information powers and charged penalties for failure to comply with information notices.  Copies of all notices were sent to the Appellant as well as to his agent.  In respect of the 2004/05 return [which, it has now been clarified, is not the subject of the present application], the Appellant’s agent effectively agreed that the disposal of two properties (Windsor Road and Harrow Road) had been omitted from the tax return.
10.	In respect of the 2003/04 return, by a letter dated 28 November 2008, the Appellant’s agent stated that the Appellant invested a £23,000 deposit in The Paddocks and that he received a 50% share of the property disposal surplus, namely £59,983.50.  On 24 July 2009, HMRC wrote to the agent stating that it was assumed that the agent agreed that capital gains tax was due in respect of the sale of The Paddocks and requesting a capital gains computation.  Having received no response, HMRC wrote to the agent again on 24 August 2009 stating that if a response was not received by 25 September 2009, HMRC would use £59,983 as the capital gains figure, which is what HMRC subsequently did in the further absence of response.  HMRC then closed the file/
11.	The Appellant subsequently submitted a notice of appeal to the Tribunal dated 21 September 2010.  The Appellant never appealed to HMRC, much less within the applicable deadline.  The notice of appeal does not provide details of grounds of appeal in sufficient detail, and in fact is really a complaint about being required to file a return.  The conditions in s.31A(1)(b) and (c) and (5) for a valid appeal have not been met.
12.	Even if there has been a valid appeal, a late appeal can be brought with the permission of the Tribunal only after an application has been made to HMRC and HMRC have not agreed.
13.	In relation to the closure notice for the year 2003/04, no excuse (and certainly no reasonable excuse) has been offered for failing to appeal within time, and no details provided of when any reasonable excuse ended or of why the assessment in the closure notice was wrong.  The appeal itself has no merit.  The Tribunal should only give permission where there is good reason to do so and the interests of justice would be served by so doing.  Mr Jones referred to rules 2 (the overriding objective) and 5(3)(a) and 20(4) of the Tribunal’s Rules, rule 3.9(1) of the Civil Procedure Rules; R (Cook) v General Commissioners of Income Tax [2009] BTC 168; Ogedegbe v Revenue & Customs [2009] UKFTT 364 (TC) and other cases.
14.	In respect of the 2003/04 closure notice, HMRC were unsure whether to assess the capital gain on The Paddocks at £59,983.50 or £36,983.50 based on what the agent had said.  The agent was asked to clarify and was informed that in the absence of a response the higher figure would be used.  There was no response and the higher figure was used.  HMRC acted correctly and the Appellant was not prejudiced.  The Appellant had the option of appealing, which he did not do within the time limit.  The Appellant was represented, and no reason has been advanced for not appealing within time.  Even if the Appellant was given to understand that he no longer had to file tax returns following his retirement, this could not have been understood as meaning that he would never again have to file tax returns regardless of any future change of circumstances.  If his circumstances did change, such as through the sale of a property giving rise to a capital gains tax liability, he would be liable to pay tax and file a tax return.
15.	The Appellant submitted amongst other matters as follows.
16.	The Appellant seeks to appeal against the 2003/04 closure notice.  He appeals as a layperson, and for him to have a fight with HMRC is like David fighting Goliath. The Appellant’s brother sent in tax returns.  The Appellant did not do so because he had previously been told by HMRC that he no longer needed to file any more tax returns.  He fell out with his accountants over this.
17.	The Appellant was interested in buying The Paddocks for his own personal occupation, and put down a deposit, but then decided not to go ahead. He paid the deposit in early 2003. He paid the deposit as if purchasing in his own name for personal occupation. After contracts were exchanged, and the purchase had not yet been completed, he spoke with his brother.  He agreed with his brother that the transaction would be for the benefit of a company owned jointly by the Appellant and his brother (the “Company”), such that if the subsequent resale of The Paddocks made a profit, the profit would go to the Company, and if it made a loss, the Company would underwrite the loss. Subsequently, it was proposed that a charity company would put up the money to complete the purchase transaction, and that if the subsequent sale of the property made a profit, the profit would be split 50:50. The charity company did put up the capital, and the property was purchased in the name of the charity company. The property was resold some two months later at a substantial profit, and the Appellant was sent a cheque for half of the profit. He banked the proceeds, and the funds went into the Company. 
18.	Having been lulled into a false sense of false security by the HMRC advice that he did not need to fill in tax returns, the Appellant did not do so. He realises now that this was incorrect.  Several years later, the Appellant was asked to complete retrospectively tax returns for several years.  
19.	The Appellant gave details to his accountant for the preparation of the returns. The issue was raised of The Paddocks, and it was obvious that HMRC had discovered something, apparently as the result of an enquiry into the charity company. The Appellant had no intention of avoiding any tax liability.  Had he known that he was required to file tax returns he would have done so. He was at loggerheads with his accountants, and considers that they should have advised him better.  He had no way of knowing what his accountants had done in relation to the situation. Sometimes professionals accept situations so as not to look incompetent.
20.	The Appellant was then hit with a huge tax bill. He was visited by an HMRC tax official who presented him with a bill for £50,000. He entered into an arrangement with HMRC to pay £5000 per month. He made two payments pursuant to this agreement. Then he started reading reports in the press about HMRC and how they were being quite draconian at the time, and reports of tax authorities acting contrary to human rights. He felt that HMRC had not dealt with him correctly.  In his situation, the Appellant felt that he had been treated wrongly by HMRC and he decided that he would appeal.
21.	The Appellant acknowledged that he had received a letter from HMRC dated 22 October 2009 advising him of the closure notice and that he had now been assessed to pay £14,537.20, and that he had a right to appeal against this decision. The Appellant said that when he received this decision he realised that he was not competent to deal with it, and he sent it to his accountants. His accountants said that they would take a look at it, and the accountant raised no issue with it.
The Tribunal’s views
22.	The Tribunal has considered all of the evidence and arguments before it.
23.	The Tribunal takes into account the public interest in the finality of tax matters and in the finality of litigation, and that time limits for bringing appeals exist for a good reason.  
24.	The Tribunal takes into account that the Appellant acknowledges that he knew in October 2009 that the closure notice had been issued and the amount of the liability in the closure notice.  The Tribunal further takes into account that the Appellant acknowledges that he had accountants at the time who he asked to look at the matter, and that his accountants did not suggest to him that there was any basis for objecting to the closure notice.
25.	The Tribunal further takes into account that the Appellant himself accepted the liability arising under the closure notice, in the sense that he entered into an agreement with HMRC to pay by instalment, and indeed made two payments under that instalment arrangement.  The Appellant, having accepted the arrangement, subsequently had a change or heart, but that change of heart was not based on anything new relating to his own particular case.  Rather, his change of heart was said to have been brought about by the fact that he had seen general reports in the press to the effect that HMRC had been draconian and not respected human rights.
26.	In the Appellant’s favour, the Tribunal takes into account that a significant sum is at stake, the Appellant’s age, the fact that he says he was informed by HMRC that he no longer needed to file tax returns, and the fact that he feels aggrieved by the fact that this turned out to be incorrect.  However, the Tribunal accepts the HMRC submission that the fact that a retired person is told that he no longer needs to file tax returns cannot be understood by a reasonable person as meaning that he will never again have to file tax returns even if his circumstances change.  The Appellant has accepted that he did indeed need to file a tax return for the year in question.  He has accepted that he knew about the closure notice at the time it was issued and had the services of accountants at the time who looked at the matter.  He says that he feels that he was not well served by his accountants, however the Tribunal considers that this would be a matter for him to raise with his accountants.  In any event, nothing specific has been placed before the Tribunal to support a conclusion that the Appellant was not competently served by his accountants.
27.	The Tribunal takes into account that the deadline for appealing was 21 November 2009, and that the notice of appeal was dated 21 September 2010.  The Tribunal is not persuaded that the substantive merits of the proposed appeal on the limited information available at this stage appear sufficiently strong that it would be unjust in all the circumstances not to permit an appeal to be brought out of time.
28.	Weighing all of the circumstances as a whole, the Tribunal considers that it should refuse permission to the Appellant to bring the present appeal outside the time limit for doing so.
Conclusion
29.	For the reasons above, the Tribunal refuses permission to the Appellant to bring the present appeal outside the time limit for doing so.
30.	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.

Christopher Staker

TRIBUNAL JUDGE
RELEASE DATE: 18 MAY 2011

Amended pursuant to rule 37 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 on