England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		13/10/2006

Mr Justice Lightman:

INTRODUCTION

1. This is an appeal by Mr Dass (acting in person) against a decision ("the Decision") of the Special Commissioner Mr Howard Nowlan ("the Commissioner") dismissing an appeal by Mr Dass from a decision of the Inspector of Taxes. The decision of the Inspector of Taxes was to disallow Mr Dass relief of £46 in respect of the payment of fees of £200 expenditure in 1998 as the enrolment fee for an examination in a part time two year course at Holborn College leading to a LL Dip Qualification. Mr Dass had applied for relief on the grounds that the fees qualified for vocational training relief under section 32 of the Finance Act 1991 or as a trading expense under Schedule D of the Taxes Act 1988.
2. The evidence before the Commissioner included a witness statement by Mr Dass and an agreed statement of facts. There was no cross-examination and no request for cross-examination.
3. The relevant facts are set out in paragraphs 3-8 of the Decision which (so far as material) read as follows:

"Mr Dass traded as a tutor in English and as an adviser in relation to the bringing of appeals before various tribunals. In or around 1997 he embarked on a course with Holborn College. This course was a part-time two-year course and would have led to an LL Dip Qualification had Mr Dass been able to take the examinations and pass them. As it was, although he twice enrolled for the examinations, he was unwell on both occasions and so was unable to sit the examinations, though he still incurred the cost of the examination fees of £200 in both 1998 and 1999.

In his own words, the description of his trade and activities prior to enrolling on the Holborn course was as follows. 'My services included moderation and examination in English, translation and word processing, settling and marking of written and oral exams, reporting any malpractice of examination regulations, also admin and evaluation work, producing examination reports'. It also included 'Giving advice and guidance to clients about statutory and human rights; self-assessment, personal development, presentation and communication skills, drafting witness statements and complaints, advice about dealing with discriminatory and detrimental treatment with reference to payment, pay advice, promotion, equal opportunities in the field of education, employment and training; taking notes, acting as a witness, making representations at a tribunal'.

In describing the Holborn course, Mr Dass said that 'the LL Dip Studies improved my communication and analytical skills. It also widened my knowledge about reasoning, contractual rights, obligations, breach of contract, human rights, legal principles and administrative law. This course would ultimately broaden my options by enabling me to teach law in Access Courses in FE and help individuals with their studies, jobs, work experience and career progression in further and higher education. The LL Dip Qualification would enable me to motivate bilingual students to choose legal careers. It would help me to analyse various problems people face in full and part time education, employment and training and to draw up action plans to resolve those problems. It would also enable me to advocate their cases in respective tribunals and Exam Boards'.

HMRC described the Holborn course as a 'bridging course' towards becoming a solicitor. Although Mr Dass said that at his age (presumably about 53), when he enrolled on the course, he had no intention of going the further step of qualifying as a solicitor, which I accept, I also accept HMRC's description of the nature of the Holborn course. Whilst Mr Dass's pre-existing activities in part involved work in preparing people for hearings before tribunals, it appears to have been predominantly related to English, translation and education. The LL Dip course was clearly going to enable Mr Dass 'to advocate (clients') causes in respective tribunals and Exam Boards', and equally clearly it was going to increase Mr Dass's legal knowledge and capabilities.

As I have already said HMRC initially disputed Mr Dass's entitlement to relief for the second of the exam fees, which were dealt with first for some reason, on the ground that the expenditure was capital expenditure, but subsequently conceded the relief on a 'one-off' or without prejudice basis because the amount claimed was so small.

This appeal relates to the fact that HMRC disallowed similar relief for the earlier fee which they dealt with subsequently. Mr Dass objected to this, not so much it seems because he then understood the conditions for entitlement to relief as vocational training relief, allowable under section 31 Finance Act 1991, or because he argued that the course was a mere adjunct to, or 'refresher' in his existing activities, and not a course that would equip him with new skills and a new qualification', so that the exam fees ranked as income rather than capital expenditure, but rather because of inconsistency with his treatment on the identical other fee…."

ISSUES

4. Mr Dass made a large number of unfounded or irrelevant complaints about the hearing before the Commissioner, the Decision and the conduct of the Revenue. Leaving aside the issue of law relating to the character of the fees paid by Mr Dass, there was nothing of substance in them. The complaints were: (1) that the Commissioner did not allow him to cross-examine. But there were no witnesses (other than himself) to cross-examine and no request was ever made to cross-examine anyone; (2) that the Revenue had not paid him the £103 which it had agreed to pay him to meet his complaints of maladministration in respect of his earlier (conceded) claim. On hearing this complaint at the hearing the Revenue stated that it had indeed paid and (in case the Revenue had not paid) gave an undertaking to pay as a matter of urgency. The Revenue later produced to me a copy of the cheque by which the payment had been made. I should add that whether or not payment has been made could not and should not affect the outcome of this appeal; (3) that he had claims for maladministration exceeding £103. But he has never proceeded with any such claim through the available applicable complaints scheme; (4) that after having allowed on a "without prejudice" basis on a one off basis his claim to relief in respect of the 1999 payment of fees, the Revenue later unlawfully refused relief on the claim to relief in respect of the 1998 payment. But the Revenue was entitled as a matter of sensible management to allow the 1999 claim without prejudice to any further claim subsequently made and was free when the claim was raised in respect of the 1998 fees to determine it on its merits: see King v. Walden (No 2) 74 TC 45.
5. I turn now to the issue as to entitlement to relief. The relief claimed is for relief of £46 (not £80 as stated in the Decision). The critical passages in the Decision are paragraphs 15 and 16 which read as follows:

"15. It was never disputed by Mr Dass that the qualification he was seeking constituted either a NVA or SVQ qualification. As it was not disputed that the course at Holborn College was a two year course, it inevitably follows that one of the requirements for relief in section 589 Taxes Act was not met. The fact that a very short explanatory pamphlet explaining the nature of the relief under these sections did not refer to all the conditions for the relief is perhaps unfortunate, but this cannot change the entitlement to the relief.

16. I agree with HMRC that the particular course was one to equip Mr Dass with a new qualification that would have enabled him to venture into new areas of practice, and it was not merely a 'refresher' in relation to his existing expertise. This seems to me to be a correct way of distinguishing between the costs (in relation to courses) that constituted capital as distinct from revenue expenditure. It is noteworthy that it was on this basis that relief was initially disputed for the first exam fee dealt with, and the contrary decision was only made on a 'one off' basis. I think that HMRC applied the test correctly and, I was told, in a manner consistently with the treatment of all other taxpayers."

6. The claim for vocational relief was plainly rightly refused by the Commissioner for the reasons which he gave and the contrary was not argued before him or me. The live legal issue is whether the fee for the examination on the course constitutes a capital or revenue expenditure. There is apparently no authority providing guidance on how the cost of courses should be treated for Schedule D purposes. The issue must accordingly be decided as a matter of principle. As Miss Diya Sen Gupta submitted to me some guidance may be obtained from the speech of Viscount Cave in Atherton v. British Insulated Helsby Cables Ltd 10 TC 155 at 192:

"[W]hen an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, I think that there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital."

7. This was the approach adopted by the Commissioner. He held that the course was not a "refresher" course to brush up or "hone" Mr Dass's existing expertise, but was directed at equipping Mr Dass with a new qualification enabling him to enter into a new area of practice. The line between the two may often be difficult to draw, but in this case the Commissioner was fully entitled on the material before him to draw the line where he did. Indeed I think that, far from his decision being open to challenge, it was clearly correct.
8. Accordingly, I dismiss the appeal.