Assessment – Error or Mistake Relief – Assessment Excessive – No relief for bad debts – taxpayer not entitled to bad debt relief – Debts not bad in disputed years – Taxpayer agreed the assessments - Assessments final and conclusive – Appeal dismissed – Taxes and Management Act, s 33 & s54.
THE SPECIAL COMMISSIONERS
HENNESSY AUGUSTUS SATUSI THOMPSON Appellant
- and -
THE COMMISSIONERS OF INLAND REVENUE Respondents
Special Commissioner: Michael Tildesley
Sitting in public in London on 10 December 2004
The Appellant appeared in person
Ingrid Simler, Counsel instructed by the Solicitor for Inland Revenue, for the Respondents
© CROWN COPYRIGHT 2005
(1) If any person who has paid tax charged under an assessment alleges that the assessment was excessive by reason of some error or mistake in a return, he may by notice in writing at any time not later than six years after the end of the year of assessment in which the assessment was made, make a claim to the Board for relief.
(2) On receiving the claim the Board shall inquire into the matter and shall, subject to the provisions of this section, give by way of repayment such relief in respect of the error or mistake as is reasonable and just.
Provided that no relief shall be given under this section in respect of an error or mistake as to the basis on which liability of the claimant ought to have been computed where the return was in fact made on the basis or in accordance with the practice generally prevailing at the time when the return was made.
(3) In determining the claim the Board shall have regard to all the relevant circumstances of the case, and in particular shall consider whether the granting of relief would result in the exclusion from charge to tax of any part of the profits of the claimant, and for this purpose the Board may take into consideration the liability of the claimant and assessments made on him in respect of chargeable periods other than that to which the claim relates.
(4) If any appeal is brought from the decision of the Board on the claim the Special Commissioners shall hear and determine the appeal in accordance with the principles to be followed by the Board in determining claims under this section and neither the appellant nor the Board shall be entitled to require a case to be stated under section 56 of this Act otherwise than on a point of law arising in connection with the computation of profits.
(1) Subject to the provisions of this section, where a person gives notice of appeal and before the appeal is determined by the Commissioners, the inspector or proper officer of the Crown and the appellant come to an agreement, whether in writing or otherwise, that the assessment or decision under appeal should be treated as upheld without variation or as varied in a particular manner or as discharged or cancelled, the like consequences shall ensue for all purposes as would have ensued if, at the time when the agreement was come to, the Commissioners had determined the appeal and had upheld the assessment or decision without variation, had varied it in the manner or had discharged or cancelled it, as the case may be.
(2) Subsection (1) of this section shall not apply where, within 30 days from the date when the agreement was come to, the appellant gives notice in writing to the inspector or other proper officer of the Crown that he desires to repudiate or resile from the agreement.
(3) – (5) not relevant.
"The situation must be viewed objectively ,from the point of view of whether the Inspector's agreement to the relevant computation, having regard to the surrounding circumstances including all the material known to be in his possession, was such as to lead a reasonable man to the conclusion that he had decided to admit the claim which had been made".
"Subject to the provisions of the Tax Acts, in computing the amount of profits or gains to be charged under Case I or Case II of Schedule D, no sum shall be deducted in respect of -
(j) any debts, except bad debts proved to be such, and doubtful debts to the extent that they are respectively estimated to be bad and, in the case of the bankruptcy or insolvency of a debtor the amount which may reasonably be expected to be received on any such debt shall be deemed to be the value thereof".
(The above is the version of section 74 which was in force at the time of the disputed assessments).
Cenlon Finance Co Ltd v Ellwood  AC 782
Scorer(Inspector of Taxes) v Olin Energy Systems Ltd  STC 218
Eagerpath Ltd v Edwards (Inspector of Taxes)  STC 26
Loss is in brackets
"Again, the same letter (17 June 1994), paragraph 4, explains the statutory position, and in the circumstances of this case I cannot accept the late appeal which you made on 20 October last. Accordingly, your request for a late appeal to be admitted for these two years will be brought before the Commissioners at their meeting on 16 May. Even if the Commissioners rule against you on that date, that would not prevent you from making an error or mistake claim, the conditions for which were again explained in the letter".
The bundle of documents did not include Mr Girvan's letter of 17 June 1994.
"The accounts were submitted at various dates between 16 June 1989 (March 1986 and March 1987, and April 1993 (March 1989 and March 1990 accounts). For various years, including review into your affairs undertaken by the Specialist Inland Revenue department, there was a long delay in agreeing these, but eventually amended assessments using the exact figures shown by your computations were issued on 17 January 1994, and these amendments determined the assessments under section 54 TMA 1970".
Mr Girvan commented in the letter upon potential relief under section 33:
"As I mentioned in my earlier correspondence, some relief can be given under section 33 (error or mistake) if the tax charged under the relevant assessment has been paid and relief can then only be given by repayment, not by amending the assessment which remains unchanged as it is final and conclusive".
|Original||1989 (£)||1990 (£)||1991 (£)||1992 (£)||1993 (£)||1994 (£)|
|Work in Progress||40,000||40,000||40,000||40,000||40,000||70,000|
|Work in Progress||10,000||5,000||5,000||5,000||5,000||12,000|
"Thank you for your letter of 9 February 1998, the contents of which we agree".
|Year end||Debtors||Amount (£)|
|31 March 1989||Thorn and Co||20,000|
|31 March 1990||Albert Saunders||21,000|
|31 March 1991||Albert Saunders
Widdington Homes Ltd
|31 March 1992||Oaklands Homes Ltd
|31 March 1993||Oakland Homes Ltd||75,000|
|31 March 1994||Oakland Homes Ltd||50,000|
Bad Debt Relief
i. The Appellant has failed to satisfy me on the balance of probabilities that the debts became bad in the years 1989/90 to 1994/95.
ii. Section 74 enables the Appellant to claim relief for bad or doubtful debts in the accounting years where there was evidence to substantiate a judgment that the debts have become bad. In the Appellant's case, the Oakland Homes' debt became bad in 1995, whilst the debts with Albert Saunders and Thorn & Co became bad in 1996.
Section 54 Agreement
a) There is no "error or mistake" in the returns for 1989/90 up to and including 1994/95 because the Appellant was not entitled to claim bad debt relief for the debts of Thorn and Co (£20,000), Albert Saunders (£51,000), Widdington Homes Ltd (£40,000), Trendcrete Ltd (£70,000) and Oakland Homes Ltd (£225,000) in the said years (see paragraphs 44-51).
b) The assessments for 1989/90 up to and including 1994/95 are final and conclusive by virtue of the agreement made on 11 February 1998 under section 54 of the TMA 1970 with the statutory consequences of section 46(2) of the TMA 1970. Thus there is no "error or mistake" in the return, but rather a failure on the part of the Appellant to pursue his right of Appeal to the Commissioners (see paragraphs 52 – 58).
c) No error or mistake relief is available for 1991/92 and 1992/93 because the assessable profits for the said years are nil and no tax has been charged (see paragraph 61).
RELEASE DATE: 26 January 2005