England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION (REVENUE)
(JACOB J) (Application of Appellant for PTA and EOT)

		Royal Courts of Justice Strand London WC2 Friday 8th March 2002

Friday 8th March 2002

1. LORD JUSTICE CHADWICK: This is a renewed application for permission to appeal against an order made on 21st November 2001 by Jacob J when dismissing an appeal under section 100C of the Taxes Management Act 1970 from the Commissioners for the General Purposes of the Income Tax for the Division of Uxbridge. It is, therefore, an application to which CPR 52.13 applies. Permission is not to be granted unless this Court considers that the appeal would raise an important point of principle or practice or that there is some other compelling reason why the Court of Appeal should hear it. The rule reflects the requirement imposed by section 55(1) of the Access to Justice Act 1999.
2. The background may be stated shortly. The applicant is an accountant practising as Fox Associates in north west London. He was served with a notice dated 10th April 2001 requiring him to furnish to an Inspector of Taxes at the Special Compliance Office working papers and link documents relating to the preparation of accounts and tax returns of two clients, Mr Anthony Miller and Revelforce Ltd, and working papers and linked documents relating to the preparation of any report of admitted tax irregularities on behalf of Mr Miller, who was the subject of an investigation by the Special Compliance Office in 1997.
3. That notice was served under section 20(3) of the Taxes Management Act 1970. The subsection is in these terms:

"Subject to this section, an inspector may, for the purpose of enquiring into the tax liability of any person ('the taxpayer') by notice in writing require any other person to deliver to the inspector or, if the person to whom the notice is given so elects, to make available for inspection by a named officer of the Board, such documents as are in his possession or power and as (in the inspector's reasonable opinion) contain or may contain, information relevant to any tax liability to which the taxpayer is or may be, or may have been, subject, or to the amount of any such liability."

4. In response to that notice the applicant wrote a long letter, the contents of which were subsequently reproduced in the form of representations made on his behalf to the General Commissioner. The representations extend over some 49 paragraphs. They include an account of the storage arrangements for papers in the offices of the applicant's firm, and of a boiler explosion which took place in the basement in 1992; and the assertion that information covering years 1988 to 1991 would have been destroyed in that explosion. So, it is said, there are relevant papers before 1991 or 1992.
5. In relation papers generated after 1991 it said that, "despite extensive searches, we have not been able to trace any information going back to 1992 up to 1998". It said that there were no "real" working papers as such or link documents necessary to produce Mr Miller's accounts. There were no working papers or link documents in connection with tax returns: those would have been based on such information as had been provided by Mr Miller. It said "there would not have been" - not that there were not, but that there would not have been - "any working papers or linked documents relating to admitted tax irregularities"; and, despite the fact that there would not have been any such papers, that the applicant had not been able to find any information during this various searches. It stated, further, that the company was only active for twelve months and there would not have been any papers in that connection. Such papers as there were in relation to this and any other case appear to have been transferred to London Docklands for storage towards the end of December 2000.
6. The effect of that response was that none of the documents requested in the notice of 10th April 2001 were provided. The Special Compliance Office were not satisfied with that response. On 13th June 2001 Mr Ian McKay, an Inspector of Taxes, laid information before the General Commissioners to the effect that Fox Associates had failed to comply with the notice of 10th April 2001. The General Commissioners were asked to impose a penalty under section 98(1) of the Taxes Management Act 1970. That subsection provides:

"... where any person--

(a) has been required by a notice served under or for the purposes of any of the provisions specified in the first column of the Table below [which includes section 20 in Part III of the Act], to deliver any return or other document, to furnish any particulars, to produce any document, or to make anything available for inspection, and he fails to comply with the notice,...

he shall be liable, subject to subsections (3) and (4) below--

(i) to a penalty not exceeding £300, and

(ii) if the failure continues ... [then he may be liable] to a further penalty ... not exceeding £60 for each day on which the failure does continue."

7. The General Commissioners, after a meeting on 8th August 2001 at which the applicant was represented, reached conclusions of fact which they set out in paragraph 12 of Notice of Reasons and Findings dated 15th November 2001. It is, I think, unnecessary to set out all those findings in this judgment. It is sufficient to refer to the following:

"(b) The appellant is an experienced professional person with considerable experience of representing taxpayers being investigated by the Special Compliance Office (SCO).

(c) The appellant is well aware of the need to retain papers in respect of the affairs of any taxpayer being investigated by the SCO.

...

(e) The appellant was aware or ought to have been aware that the investigation in respect of the taxpayer was still live;

(f) The appellant was aware of the responsibilities to retain papers on a live file and to advise the taxpayer that the papers should be retained as the investigation was still live;

(g) The appellant was aware of the responsibility to retain papers on live investigations and we did not accept that the taxpayer's file could not be traced despite the considerable representations concerning the appellant's storage and office problems referred to in his representations."

8. That led the Commissioners to the conclusion which they reached in subparagraph (j):

"We did not accept that the appellant was unable to find and submit any papers whatsoever."

9. Accordingly, the General Commissioners found that there had been a failure by the applicant to comply, in whole or in part, with the notice of 10th April 2001 and they determined a penalty of £300. They did not determine any continuing penalty: it does not appear that they were asked to do so.
10. The applicant appealed to the High Court. Section 100C(4) of the Taxes Management Act restricts such an appeal to a question of law. The question of law identified by the judge was whether the General Commissioners had made their determination in such a way that was unreasonable. If so, that would constitute an error of law. The judge rejected the contention that the Commissioners had erred in law. He said this:

"In these circumstances, it seems to me that it was entirely open to the Commissioners to say they do not accept that the taxpayer's file could not be traced. There was ample material upon which they could so find. It follows that there was no error of law."

11. The applicant seeks permission to appeal to this Court. As I have said, permission for what would be a second appeal can only be granted if conditions in CPR 52.13 are satisfied.
12. I turn, therefore, to the grounds of appeal in section 7 of the appellant's notice. It is said, first, that the judge was wrong in law in failing to find that the General Commissioners made an error of law in holding that (1) the appellant was liable to a penalty pursuant to 98(1)(b)(i) Of the Taxes Management Act 1970; and (2) that the serving of the notice pursuant to section 20(3) of the 1970 Act upon the appellant by the Inland Revenue gave rise to a presumption that the appellant had in his possession the documents referred to therein. The appellant's notice took a third point which is no longer pursued; that to require the appellant to carry out an extensive search would amount to imposing 'forced labour' upon him within the meaning of Article 4 of the Convention.
13. The second main ground is that the procedure for appealing to the High Court from the determination of the General Commissioners pursuant to section 100C(4) of the Taxes Management Act 1970 and CPR 52 is unfair and contrary to Article 6 of the European Convention on Human Rights; in that CPR 52 PD 23.4 requires the appellant's notice to be served upon the General Commissioners whose decision is under appeal before they can be required to give notice of their findings, and the reasons for those findings, to the Court; and the appellant. Those points are developed in the skeleton argument in this Court and have been developed orally by Mr Ashe QC on behalf of the applicant.
14. The only live point on the first of the two main grounds is the assertion that the service of a notice pursuant to section 20(3) was held by the judge to give rise to a presumption that the appellant had in his possession the documents referred to. But the judge did not find that the service of a notice pursuant to section 20(3) gave rise to a presumption. What he did find was that, in this case, the documents that were sought - namely working papers and link documents used or generated for the purposes of producing accounts or a report into irregularities - were self-evidently documents which would have been at one stage in the possession and power of the applicant. That is self-evident because the documents that are requested, as I read the notice of 10th April 2001, are documents which would have been generated by the applicant.
15. Like the General Commissioners, I find it difficult to accept that accounts could be produced without the generation of some working papers. But, in any event it is not said that there were no such working papers. What is said is there were no "real" working papers. What is to be understood by the concept of an "unreal" working paper has not been explored. There must - as the General Commissioners thought, and the judge upheld - have been some papers generated in the course of this applicant performing his role as an accountant for the taxpayer. The question for the General Commissioners was: what had happened to those working papers; in particular were they satisfied that papers which the applicant had once had he no longer had?
16. In relation to papers destroyed in a boiler explosion, they could readily have been satisfied that they were no longer in existence. But in relation to papers which had been removed to storage, it was impossible to be satisfied that they no longer existed - or were no longer in the power or possession of the applicant - without evidence that some proper search had been made for them. A paper which is in a box under the applicant's control is still a paper under the applicant's control even if he has not looked in the box. The best that the applicant could say was that considerable effort had been made to search through the depository. The General Commissioners plainly thought - as they said in paragraph 12 of their Reasons - that the papers that the applicant was required to produce were likely to be retained on live files; so they did not accept that explanation. That was a question of fact for them. It did not turn on any presumption arising from service of the notice; other than the request in the notice itself for working papers generated by the accountants. There is no important point of practice or principle raised by the first main ground; and no other compelling reason why a second appeal on that ground should be entertained.
17. The second ground of appeal gives rise to a point of principle. I will give permission in relation to the second ground of appeal. But I do so with some hesitation, for two reasons: first, it is not suggested that that point was taken before the judge - so this Court does not have the judge's views upon it; and, secondly, because there is no suggestion in this case that the procedure followed here actually gives rise to any unfairness.
18. Nevertheless, neither limb of CPR 52.13 requires the Court to be satisfied that an appeal would have any real prospect of success. The question is: is there an important point of principle? The point of principle that is raised under the second main ground is that the procedure under section 100C(4) and paragraph 23.4 of the Practice Direction issued under CPR 52 requires an appellant to serve an appellant's notice against a decision of the General Commissioners or the Special Commissioners before he knows what their findings, or the reasons for their decision, are. It is said that that puts him in a position where he has to decide whether or not to appeal without knowing why the decision has gone against him.
19. I doubt whether that procedure causes any difficulty in practice; in that, if matters emerge in the findings and reasons which have not been dealt with in the appellant's notice, I think it inconceivable that an appellant would not be permitted to amend his appellant's notice, and serve a supplemental skeleton argument, so as to deal with those matters. Nevertheless the point of principle having been raised, it seems to me appropriate that the Court of Appeal should have the opportunity to rule upon the point; if the applicant wishes to pursue it. If there is any substance in the point it should be addressed sooner rather than later.
20. I will give permission to appeal; but limited to ground 2 in section 7 of the appellant's notice. For the avoidance of doubt, I refuse permission to appeal under ground 1 of the appellant's notice. I estimate that the time required for the limited appeal for which I have given permission to be not more than half a day. I will give an extension of time for the appeal.
ORDER: Application for PTA on ground 1 refused; application for PTA on ground 2 granted; EOT granted.