[2009] UKFTT 270 (TC)

TC00216

Appeal number:  SC/3196/2008

INCOME TAX – daily penalties for failure to file tax returns – authority of Parliament to legislate following accession of United Kingdom to European Communities – right to property – section 93(3) Taxes Management Act 1970 – appeal dismissed

FIRST-TIER TRIBUNAL

TAX

                                                   IAIN K BELL                                  Appellant

                                                                      - and -

                                 THE COMMISSIONERS FOR HER MAJESTY’S

                                       REVENUE AND CUSTOMS (Income Tax)    Respondents

                                                TRIBUNAL: Nicholas Aleksander (Tribunal Judge)

Sitting in public in London on 25 September 2009

Tim Buley of counsel instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents

The Appellant having failed to attend the hearing but the Tribunal being satisfied that reasonable steps had been taken to notify the Appellant of the hearing and that it was in the interests of justice to proceed with the hearing.

© CROWN COPYRIGHT 2009

DECISION

1.     The issues for determination in this appeal are whether the Appellant ("Mr Bell") has an obligation to file tax returns pursuant to s8 Taxes Management Act 1970 ("TMA"); and whether the daily penalties imposed against Mr Bell for failure to submit tax returns were valid.

2.     The Respondents ("HMRC") were represented by Mr Buley.  Mr Bell did not attend the hearing.  I am satisfied that reasonable steps were taken to notify Mr Bell of the hearing, as the Tribunal wrote to Mr Bell on 18 August 2009 informing him of the hearing date and venue.  In addition, HMRC sent Mr Bell the hearing bundles in the week before the hearing date, and these were signed for.  I am satisfied that it is in the interests of justice to proceed with the appeal in Mr Bell's absence, particularly as Mr Bell has set out his arguments in detail in a series of letters to HMRC and the Tribunal office.

3.     The Tribunal had before it a bundle of documents.

Background

4.     The appeal concerns the decision of HMRC to impose daily penalties under s93(3) TMA on Mr Bell for his failure to file tax returns.  The daily penalties relate to the tax years 2000/01, 2001/02, 2002/03 and 2004/05.  The penalties have been held over pending this appeal and amount to £1800.

5.     Mr Bell was served with annual notices to file a tax return under s8 TMA.  He has failed to comply with these notices.  On 18 January 2006, HMRC wrote to Mr Bell noting that his tax returns were outstanding.  A further letter was sent on 24 April 2006 to inform him that if his failure to file returns continued, HMRC would apply to the General Commissioners to impose daily penalties under s93(3) TMA.  HMRC also telephoned Mr Bell and left messages for him.  On 18 November 2006, an HMRC officer called at Mr Bell's home to verify that he still lived at the address.  Mr Bell was seen, but said that he did not want to discuss the outstanding returns.  On 30 November 2006 Mr Bell wrote to HMRC stating that he was enclosing the documents required.  The documents enclosed were dated sheets of paper on which had been written "Payments for Government services £10,000 only".  Following receipt, HMRC again telephoned Mr Bell and left a message asking him to call them.  Mr Bell did not respond.

6.     As Mr Bell continued to fail to comply with the notices requiring him to file tax returns, on 27 March 2007 HMRC applied to the General Commissioners for the Division of Berkshire for a direction under s93(3) TMA.  The direction was issued by the General Commissioners on 17 April 2007, directing HMRC to levy daily penalties under that section.  On 23 April 2007 HMRC wrote to Mr Bell informing him that the direction had been issued and that he would not receive any further notice before penalties would be charged.  Penalty notices were issued on 15 May 2007 for each of the outstanding tax years.  A daily penalty of £30 was imposed for the period 30 April 2007 to 14 May 2007 totalling £450 for each of the tax years in default.

7.     Mr Bell entered into correspondence with HMRC outlining his reasons for not submitting tax returns.  This included a letter dated 12 June 2007 in which he stated that he wanted to appeal against the decision to impose daily penalties and setting out his reasons for not filing the returns.  I address his reasons below.  The correspondence continued until April 2008 when Mr Bell was informed that his appeal would be listed for a hearing.  A hearing took place before the General Commissioners.  Mr Bell did not attend that hearing, but made a request that the appeal be transferred to the Special Commissioners.  That application was granted.  Following the abolition of the Special Commissioners, the appeal was transferred to this Tribunal under paragraph 6, Schedule 3 to the Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 ("the Appeals Order"). 

Issues

8.     Mr Bell has set out in his letters to HMRC and this Tribunal the reasons why he considers that he is not required to file tax returns, in particular his letter of 12 June 2007 to HMRC and an undated letter to the Tribunal received on 5 December 2008.  I would summarise his arguments as follows:

(1)  As all humans are created equal, government and the making of legislation requires the consent of the governed

(2)  As a result of the UK joining the EEC, the UK has ceded its sovereignty to (what is now) the EU.  In doing so it acted dishonestly and abused the process of law making to pursue a course of action which is contrary to its primary purpose thereby negating the sole source of its legitimacy.  Laws promulgated by Parliament therefore no longer have the consent of the governed and are therefore no longer binding. 

(3)  All humans have an absolute right to own property which is gained as a result of their own efforts.  Taxation is necessary to pay for government service.  Rightful taxation can only be by contract as payment for government service.  Since the UK government and Parliament are no longer responsible for the governance of the UK, taxation imposed by HMRC is coercive seizure of rightfully held property and cannot be justified.

(4)  As the transfer of sovereignty from Parliament to the EU was effected without the consent of the people, the people have a right to challenge Parliament's actions, and Mr Bell therefore has a right to refuse to file income tax returns.

(5)  Cessation of control over borders and the subordination of the UK's legal system to that of the EU effectively dissolves the UK. The UK no longer exists as a separate legal entity.

(6)  It is essential that HMRC issue Mr Bell with a statement that they recognise that it is the right of the UK people to govern themselves, and that every individual owns the right to property.  Failure to do so demonstrates total absence of bone fide intent on the part of HMRC, in that they are knowingly complicit in Parliament's attempts to strip us of these fundamental rights through the machinery of the law

(7)  The EU constitution is the constitution of a totalitarian state

(8)  EU regulations routinely require specific performance

(9)  Liberty is valued second only to life itself

(10)   Peaceful resolution of dispute requires submission to reason

9.     In so far as Mr Bell questions the validity of the TMA (and therefore of the notices and penalties issued under it), I would note as follows:

10.  Mr Bell does not dispute that the TMA passed through both Houses of Parliament and received Royal Assent, as have all subsequent amendments to that Act.  The TMA is therefore an Act of Parliament.

11.  Mr Bell argues that as UK has ceded sovereignty to the EU, Acts of Parliament no longer have validity. This fundamentally misunderstands the interaction of English and EU law.  The only reason EU laws have effect in the UK is as a consequence of an Act of Parliament – the European Communities Act 1972.  Although the effect of the European Communities Act 1972 (which gave statutory force to the EU treaties in the United Kingdom) may have been to cede or pool sovereignty for those matters within the competency of the EU – Parliament cannot fetter itself, and Parliament remains free to repeal the European Communities Act and withdraw from the EU.   Although (as a consequence of the European Communities Act 1972) a UK court may have a duty to override any rule of national law found to be in conflict with any directly enforceable rule of EU law (see for example Factortame (No 2) [1991] 1 AC 603 at 659), a UK court has a duty to enforce national law so far as its subject matter is outside the competence of the EU or the national law not in conflict with directly enforceable EU law.  There is nothing in this case which suggests that the relevant provisions of the TMA are in conflict with any directly enforceable rule of EU law, and I am therefore bound to give effect to those provisions.

12.  Mr Bell has a right to property. In particular Article 1 of the First Protocol to the European Convention of Human Rights provides:

Protection of property

Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.

13.  This has direct effect under UK law as a result of s1, Human Rights Act 1998.  However, this is not an absolute right, and Article 1 of the First Protocol qualifies the right to possessions by (amongst other things) the right of the state to secure the payment of taxes.

14.  Mr Bell's other arguments are primarily directed at the legislative process by which the United Kingdom became a member of (what is now) the European Union, and the nature of the European Union itself.  These are beyond the competence of this Tribunal, and are issues that are better raised with his MP and MEP.

Decision

15.  I therefore dismiss the appeal.

16.  The hearing having taken place in the absence of Mr Bell, he has a right to apply for this decision to be set aside.  Mr Bell also has a right to apply for permission to appeal against this decision.  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.

Costs

17.  Mr Buley wished to reserve HMRC's right to apply for costs.  The award of costs is governed by Rule 10 of the Tribunal Procedure (First-tier Tribunal)(Tax Chamber) Rules 2009.  As this appeal was not allocated to the Complex track, costs can only be awarded if the Tribunal considers that a party or their representative has acted unreasonably in bringing, defending or conducting proceedings.  However, this appeal was transferred to the Tribunal from the Special Commissioners under the Appeals Order, and paragraph 7(7) of Schedule 3 to the Order provides that any order for costs can only be made if and to the extent that an order could have been made (in essence) had this appeal continued before the Special Commissioners.  The Special Commissioners' power to award costs was governed by the Special Commissioners (Jurisdiction and Procedure) Regulations 1994.  Regulation 21 provided that costs could only be awarded if a party had acted wholly unreasonably in connection with the hearing.  Thus I am only able to award costs if and to the extent that Mr Bell has acted wholly unreasonably in connection with the hearing (if Mr Bell has acted "wholly unreasonably" in connection with the hearing for the purposes of Regulation 21 of the Special Commissioners (Jurisdiction and Procedure) Regulations 1994, then it must logically follow that he acted "unreasonably" for the purposes of Rule 10 of the Tribunal Procedure (First-tier Tribunal)(Tax Chamber) Rules 2009).

18.  I therefore give the following directions in relation to costs:

(1)  Any application by HMRC for costs must be made be in writing and sent or delivered to the Tribunal and to Mr Bell not later than 28 days after the date of release of this decision notice

(2)  The application must set out in reasonable detail the wholly unreasonable acts of Mr Bell in connection with the hearing and be accompanied by a schedule of costs or expenses in sufficient detail to enable the Tribunal (if it decides to do so) to undertake a summary assessment of such costs or expenses

(3)  The Tribunal will list the application for a hearing at which Mr Bell may make representations and at which the Tribunal shall either decide the matter or give further directions

(4)  Not later than 14 days before the hearing date, Mr Bell shall serve on the Tribunal and on HMRC written details of his financial means

Nicholas Aleksander

TRIBUNAL JUDGE

RELEASE DATE: 13 October 2009

Judgments referred to in skeleton arguments but not in the decision:

James v The United Kingdom [1986] ECHR 8793/79 (European Court of Human Rights)