[2010] UKFTT 480 (TC)

TC00741

Appeal number: TC/2009/12159

Appeal pursuant to Taxes Management Act 1970 (TMA) s.19A(6) against a notice issued pursuant to TMA s.19A—Appeal dismissed

FIRST-TIER TRIBUNAL

TAX

MR PASCHAL CHINEDUM OPARA Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL:  Dr Christopher Staker (TRIBUNAL JUDGE) Mrs Roberta Johnson (Tribunal Member)

Sitting in public in Sutton on 25 August 2010

No appearance by or on behalf of the Appellant

Mr K Shorte, HMRC Presenting Officer, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

Introduction

1.       The Appellant appeals against a notice issued to him by HMRC pursuant to s.19A of the Taxes Management Act 1970 (“TMA”) in respect of the 2002/03 and 2003/04 tax years.

Hearing in the absence of the Appellant

2.       The appeal was listed for hearing at Sutton on 25 August 2010.  HMRC was represented at the hearing by Mr Shorte.  There was no appearance on behalf of the Appellant. 

3.       Prior to the hearing, by a letter dated 11 August 2010, the Appellant requested a postponement of the hearing scheduled for 25 August 2010, stating that it was impossible for him to attend the hearing on 25 August 2010 as he had to sit an examination on that date.  According to the letter, the Appellant “had no prior knowledge of this examination taking place on this date”.  The letter went on to state: “DPCL Accountants no longer act for me.  I am representing myself.  I could send in written submissions but for the witnesses I desire to call.  In view of the above, could you please give me any other dates after 3^rd of September 2010”.  Attached to the letter was a letter from the College of Law dated 4 August 2010 stating that the Appellant was retaking his Welfare exam on 25 August 2010 between 2pm and 5pm.

4.       On 16 August 2010, a Judge of the Tribunal refused this application by the Claimant for a postponement of the hearing.  That decision contained a chronology of these proceedings, noting that on four previous occasions this appeal has been listed for hearing but then postponed at request of the Appellant (scheduled hearings of 16 December 2009, 18 March 2010, 15 April 2010 and 16 July 2010), and that a hearing had once been cancelled at the direction of the Tribunal (scheduled hearing of 10 February 2010).  The 16 August 2010 decision noted that on 12 July 2010, the Appellant had confirmed to the Tribunal that he was available for the hearing on 25 August 2010, that “The hearing has been fixed, after many delays, for a date confirmed as available by the Appellant himself”, and that “Any further postponement of this hearing would inconvenience unreasonably the Respondents as well as the Tribunal”.  The decision further noted that it would be a matter within the discretion of the Tribunal on the hearing date whether to proceed with the hearing in the Appellant’s absence and that the Appellant was advised that “it would be prudent for the Appellant to submit in advance any written representations he wishes to be considered by the Tribunal”.

5.       The Tribunal notes that in relation to the hearing previously scheduled for 16 December 2010, there is on the file a file note of the Tribunals Service dated 15 September 2010, indicating that the Tribunals Service consulted with the Appellant’s representatives as to available dates before fixing the hearing for that date. 

6.       The Tribunal notes that in relation to the hearing scheduled for 18 March 2010, not only the Appellant, but also Mr Shorte, indicated that they were unable to attend on that date.

7.       The Tribunal also notes that in relation to the hearing previously scheduled for 16 July 2010, there is a letter on the file from the Appellant to the Tribunals Service dated 10 May 2010 stating “Preferably, I would like the hearing to be scheduled between 16 July 2010 and 30 July 2010”.  The date of 16 July 2010 was thus expressly fixed in accordance with the Appellant’s stated availability.  However, after the hearing was then scheduled for 16 July 2010, the Appellant wrote a letter to the Tribunals Service dated 30 June 2010 stating that he would not be available from 15 July to 3 August 2010, 17 to 23 August 2010 or on 13 November 2010. 

8.       Prior to the scheduling of the hearing for 25 August 2010, the Appellant had in a letter to the Tribunals Service dated 12 July 2010 stated “I can confirm that barring any unforeseen circumstances, I shall be available for the hearing on 25 August 2010”.

9.       At the hearing the Tribunal, after hearing submissions from Mr Shorte on the issue, considered whether it should proceed with the matter in the Respondent’s absence under Rule 33 of The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (the “Rules”).  The Tribunal was satisfied that the requirement of Rule 33(a) was met.  The Tribunal was not satisfied on the material before it that the Respondent would have been genuinely unable to attend if it had been his wish to do so.  No details were given as to whether the Appellant had made any attempt to have the 25 August 2010 exam rescheduled on the ground that he had a Tribunal hearing on that day, or indeed, whether the Appellant had made any attempt in advance to avoid having the exam scheduled at that particular time.  In view of the history outlined above, the Tribunal was inclined to draw the conclusion that the Appellant has been seeking to delay the hearing of this matter by obtaining various postponements.  However, even if it were the case that the scheduling of the exam on 25 August 2010 was genuinely unavoidable and beyond the control of the Appellant, the Tribunal considered that in view of the history of delays in this matter, it would be in the interests of justice to proceed with the hearing despite the Appellant’s inability to attend.  Although the Appellant said that he is presently unrepresented, no reason was given by the Appellant as to why he could not be represented at the hearing in his absence.  The 16 August 2010 decision of the Tribunal noted that “it would be prudent for the Appellant to submit in advance any written representations he wishes to be considered by the Tribunal”.  Furthermore, while the Appellant said that he wished to call witnesses, no details were given of what witnesses he would intend to call, or of the matters on which they would give evidence.  The Tribunal also took into account that Rule 38 of the Rules makes provision for a decision of the Tribunal to be set aside in circumstances where the appellant or his representative were not present at the hearing, if it is in the interests of justice to do so (Rule 38(2)(d)). Considering the circumstances as a whole, the Tribunal considered that it was in the interests of justice to proceed with the hearing in the Appellant’s absence (Rule 33(b)).

Relevant legislation

10.  Section 9A(1) of the TMA states as follows:

(1) An officer of the Board may enquire into a return under section 8 or 8A of this Act if he gives notice of his intention to do so (“notice of enquiry”)—

(a) to the person whose return it is (“the taxpayer”),

(b)  within the time allowed.

11.  Section 19A of the TMA states as follows:

(1) This section applies where an officer of the Board gives notice of enquiry under section 9A(1) or 12AC(1) of this Act to a person (“the taxpayer”).

(2) For the purpose of the enquiry, the officer may at the same or any subsequent time by notice in writing require the taxpayer, within such time (which shall not be less than 30 days) as may be specified in the notice—

(a) to produce to the officer such documents as are in the taxpayer's possession or power and as the officer may reasonably require for the purpose of determining whether and, if so, the extent to which —

(i) the return is incorrect or incomplete, or

(ii) in the case of an enquiry which is limited under section 9A(5) or 12AC(5) of this Act, the amendment to which the enquiry relates is incorrect, and

(b)  to furnish the officer with such accounts or particulars as he may reasonably require for that purpose.

(2A) The officer of the Board may also (whether or not he imposes a requirement under subsection (2) above), by a notice in writing, require the taxpayer, within such time (which shall not be less than 30 days) as may be specified in the notice—

(a) to produce to the officer such documents as are in the taxpayer's possession or power and as the officer may reasonably require for the purpose of making a determination for the purposes of section 9D(1)(c) or 12AE(1)(c) of this Act, and

(b)  to furnish the officer with such accounts or particulars as he may reasonably require for that purpose.

(3) To comply with a notice under subsection (2) or (2A) above, copies of documents may be produced instead of originals; but—

(a) the copies must be photographic or otherwise by way of facsimile; and

(b)  if so required by a notice in writing given by the officer, in the case of any document specified in the notice, the original must be produced for inspection by him within such time (which shall not be less than 30 days) as may be specified in the notice.

(4) The officer may take copies of, or make extracts from, any document produced to him under subsection (2), (2A) or (3) above.

(5) A notice under subsection (2) or (2A) above does not oblige the taxpayer to produce documents or furnish accounts or particulars relating to the conduct of —

(a) any pending appeal by him, or

(b)  any pending referral to the tribunal under section 28ZA of this Act to which he is a party.

(6) An appeal may be brought against any requirement imposed by a notice under subsection (2) above to produce any document or to furnish any accounts or particulars.

(7) An appeal under subsection (6) above must be brought within the period of 30 days beginning with the date on which the notice under subsection (2) or (2A) above is given.

(8) Subject to subsection (9) below, the provisions of this Act relating to appeals shall have effect in relation to an appeal under subsection (6) above as they have effect in relation to an appeal against an assessment to tax.

(9) On an appeal under subsection (6) above section 50(6) to (8) of this Act shall not apply but the tribunal may—

(a) if it appears that the production of the document or the furnishing of the accounts or particulars was reasonably required by the officer of the Board for the purpose mentioned in subsection (2) or (2A) above, confirm the notice under that subsection so far as relating to the requirement; or

(b)  if it does not so appear, set aside that notice so far as so relating.

(10) Where, on an appeal under subsection (6) above, the tribunal confirms the notice under subsection (2) or (2A) above so far as relating to any requirement, the notice shall have effect in relation to that requirement as if it had specified 30 days beginning with the determination of the appeal.

(11) The determination of the tribunal of an appeal under subsection (6) above shall be final and conclusive (notwithstanding the provisions of sections 11 and 13 of the TCEA 2007).

(12) Where this section applies by virtue of a notice given under section 12AC(1) of this Act, any reference in this section to the taxpayer includes a reference to any predecessor or successor of his.

12.  Section 19A of the TMA has now been repealed by the Finance Act 2008 s.113, Schedule 36, paragraphs 65-66, but subject to a savings provision in SI 2009/404, article 3, to the effect that s.19A of the TMA continues to have effect in relation to a notice given under s.9A of the TMA on or before 31 March 2009.

The proceedings

13.    Mr Shorte presented submissions on behalf of HMRC.  He provided the Tribunal with his written speaking notes which will be contained on the case file, and it is therefore unnecessary to set out his submissions in full.  Mr Shorte relied on the authority of Sokoya v Revenue and Customs Commissioners [2008] STC (SCD) 51 and [2008] EWHC 2132 (Ch) for the proposition that documents the production of which may be required by a s.19A notice are not limited to documents which go to show whether individual entries in a tax return are correct.  The Tribunal has considered all of the material before it as a whole.

The Tribunal’s findings

14.    An enquiry under s.9A of the TMA was opened in respect of the Appellant’s 2002/03 tax return on 29 October 2004.  An enquiry in respect of his 2003/04 tax return was opened on 23 August 2005.  Previous s.19A notices have been issued by HMRC (formerly the Inland Revenue) in respect of both tax returns on various dates between 2004 and 2006.  The present appeal relates to s.19A notices issued in respect of the two tax years on 30 July 2008.  These notices are found at pages 18-24 of the HMRC bundle of documents.  The notices requested in particular that the Appellant provide statements for various bank accounts, details in relation to mortgages, details of unknown lodgements and unknown withdrawals, and details of certain traced payments.

15.    There have been various exchanges of correspondence between the Appellant and HMRC in relation to the s.19A notices in question.  HMRC’s reasons for wanting the information and documents specified in the notices are explained in letters from HMRC to the Appellant dated 18 August 2008 (pages 10-11 of the HMRC bundle) and 8 September 2008 (pages 3-5 of the HMRC bundle).  On the basis of the material before it, the Tribunal is prima facie satisfied that the production of the documents and information specified in the notices are reasonably required by HMRC for purposes mentioned in s.9A(2) or (2A) of the TMA.

16.    The Appellant’s grounds of appeal against the notices are set out in letters from him to HMRC dated 26 and 29 August 2008 (pages 6 to 9 of the HMRC bundle).  The HMRC letter of 8 September 2008 referred to above was a response to the Appellant’s 26 August 2008 letter and sets out the HMRC position in relation to the Appellant’s grounds of appeal.  The Tribunal considers first the 14 grounds of appeal (numbered (a) to (n) respectively) in the Appellant’s letter dated 29 August 2009.

17.    The Appellant’s first ground of appeal is that s.12B of the TMA does not place on the Appellant a duty to maintain all of the documents and information specified in the notices.  The Tribunal finds this to be irrelevant.  Section 19A of the TMA does not limit notices under that section to documents and information required by s.12B to be maintained by a taxpayer, but rather extends to “such documents as are in the taxpayer's possession or power”.  If documents are not in the taxpayer’s possession or power, he or she cannot be required by s.19A notice to do the impossible and to produce them.  If the taxpayer does not possess documents that he or she is required by s.12B to maintain, there may be consequences as a result of the failure to comply with that duty.  In other cases where there is no duty to maintain documents, failure to be able to produce them may have no consequences.  However, if the taxpayer nonetheless has the documents in his or her possession or power, he or she may well be required to produce them by a s.19A notice.  The fact that he or she does not have the documents will not however invalidate the s.19A notice itself, or in itself be a valid ground of appeal against the s.19A notice.

18.    As part of his first ground of appeal, the Appellant also states that the requested documents and information “are not reasonably connected with my tax return”.  This argument is however not further elaborated.  The Tribunal finds that the Appellant has advanced no reasons that would lead the Tribunal to the stated conclusion.

19.    The Appellant’s second ground of appeal is that even if there is a duty on the Appellant to maintain all of the documents and information specified in the notices, the statutory time limit for that duty has expired.  The reasoning in paragraph 17 above applies equally to this ground of appeal.  Even if it were the case that the Appellant is under no duty to maintain certain records because the applicable time limit has expired (or had expired at the time that the s.19A notices were issued), the position remains that s.19A notices can extend to material “in the taxpayer's possession or power”, even if the taxpayer is under no legal obligation to have them in his or her possession or power.

20.    The Appellant’s third ground of appeal is that records are not in his possession or control and not within his power to obtain them “as the Financial Services Authority guidelines to hold such records applies e.g. application for equity release or further advance”.  The reasoning in paragraph 17 above again applies to this ground of appeal. 

21.    The Appellant’s fourth ground of appeal is that “all the information in my possession has been given to” HMRC.  The Tribunal finds that the reasoning in the paragraph 17 applies also to this ground of appeal.  The fact that a taxpayer claims not to have in his or her possession or power documents to which a s.19A notice relates does not invalidate the s.19A notice itself, and is not in itself a valid ground of appeal against the s.19A notice.

22.    The Appellant’s fifth ground of appeal is that “the use of the term ‘Supporting documentation’ is generic and misleading and does not apply in the circumstances”.  This ground of appeal is not elaborated by further argument.  The Tribunal is not satisfied that the s.19A notices are overbroad or overly vague.

23.    The Appellant’s sixth ground of appeal is that he is an individual, that he is not self-employed and did not engage in any trade in the year under question and that the company under which he was employed was not part of the enquiry.  The Tribunal finds that this ground of appeal deals with the substance of the issues in the enquiry.  The Tribunal finds that the documents and information requested could be used by HMRC to establish whether or not what the Appellant says is correct.  The Tribunal finds that the Appellant has advanced no reason in this ground of appeal as to why the s.19A notice was not properly and appropriately issued.

24.    The Appellant’s seventh ground of appeal is that he has already supplied all requested details of rental income.  The reasoning in paragraph 21 above applies also to this ground of appeal.

25.    The Appellant’s eighth ground of appeal is that personal loans, overdrafts, credit cards and equity releases from his main residence are all loans, and that information related to them are therefore not reasonably connected to his tax return.  The Tribunal finds that the reasoning in paragraph 23 above applies also to this ground of appeal.  The documents and information requested in the s.19A notices would be relevant to determining whether what the Appellant says is correct, and are therefore relevant to the enquiry into the Appellant’s tax return.

26.    The Appellant’s ninth ground of appeal is that because the amounts referred to were loans, records relating to those loans were not underlying records within the meaning of s.12B of the TMA.  The reasoning in paragraphs 17 and 19-20 above apply also to this ground of appeal.  Notices under s.19A need not be confined to documents falling within s.12B of the TMA.

27.    The reasoning in paragraph 23 above also applies to the Appellant’s tenth to fourteenth grounds of appeal, in which the Appellant claims that the loans and repayments were not from any taxable source, that no taxable gains emanated from the use of the loans, that the Appellant did not acquire or dispose of fixed assets in the years under consideration, that deposits and withdrawals in the bank statements were not from any taxable source, and that the Appellant “has raised queries on some of the figures, alleged accounts and information which the Inspector is relying on for continuing the enquiry”.  These claims by the Appellant go to the substance of the enquiry being conducted by HMRC. A determination by HMRC of the question whether or not these claims by the Appellant are correct is a purpose of the enquiry being conducted by HMRC into the Appellant’s tax returns.  The outcome of that enquiry cannot be presumed at this stage.  The documents and information requested in the s.19A notices would be relevant to determining whether what the Appellant says is correct, and are therefore relevant to the enquiry into the Appellant’s tax return.

28.    The Tribunal next considers first the 14 grounds of appeal (numbered 1 to 14 respectively) in the Appellant’s letter dated 26 August 2008.

29.    The Appellant’s grounds 1 to 7 are the same as the first seven grounds in the letter dated 29 August 2008, which are already dealt with above.

30.    The Appellant’s eighth ground of appeal is that HMRC is “enquiring about my life style but such an enquiry is alien to any sections of the TMA 1970 or nay [sic] other known rule of law”.  The Tribunal finds that the relevant test for a notice under s.19A is whether HMRC “reasonably require [the documents or information] for the purpose of determining” matters specified in sub-section (2) or (2A) of that section.  If HMRC reasonably require documents or information relating to a taxpayer’s lifestyle in order to determine whether the taxpayer’s return is incorrect or incomplete, then such documents will appropriately fall within the s.19A power.  There is nothing in s.19A to exclude documents or information that would otherwise fall within the terms of that section, merely because they relate to a taxpayer’s “life style”.  Clearly information relating to a taxpayer’s lifestyle can be relevant to the question whether the taxpayer’s return is incorrect or incomplete, for instance where the taxpayer’s standard of living is clearly in excess of his or her means according to the income stated in the tax return.

31.    The reasoning in paragraphs 25 and 27 above also applies to the Appellant’s ninth to eleventh grounds of appeal, in which the Appellant claims that there were no capital gains, earnings or taxable gains that arose from the use of credit cards, that credit card use was not claimed in respect of a rented property in the year in question, and that there were no earnings, income or capital gains associated with the documents requested in the notice which relate to personal loans with no tax consequences.

32.    The Appellant’s twelfth ground of appeal is that “The Tax Inspector is now allowing personal opinions and presumptions to bear on what ought to have been an enquiry on my return”.  This argument is not further developed or justified.  The Tribunal finds that nothing has been advanced by the Appellant that would demonstrate that the decision to issue the s.19A notices were inappropriately influenced by “personal opinions and presumptions”.

33.    The Appellant’s thirteenth ground of appeal is the same as the fourteenth ground of appeal in the letter of 29 August 2008, which has already been dealt with above.

34.    The Appellant’s fourteenth ground of appeal is that “The enquiry is unnecessarily being prolonged and is now a colossal waste of time and taxpayers money”.  This argument is not developed.  The Tribunal finds that this is not a valid ground of appeal against a notice issued under s.19A.  In any event, the Tribunal finds that the Appellant has not established either that the enquiry has been prolonged “unnecessarily”, or if it has, that this is attributable to the conduct of HMRC rather than to the Appellant or to external circumstances.

35.    The Tribunal has also considered a letter from the Appellant to HMRC dated 5 February 2010.  In the Tribunal’s view, the contents of this letter raise no matter that has not already been sufficiently addressed by the reasoning above.

36.    Having considered all of the material before it, the Tribunal finds, pursuant to s.19A(9)(a) of the TMA, that it appears that the production of the documents or the furnishing of the accounts or particulars specified in the notices under appeal was reasonably required by HMRC for the purpose mentioned in subsection (2) or (2A) of s.19A.  The Tribunal accordingly dismisses the appeal and confirms the s.19A notices that are the subject of this appeal in their entirety.

37.    This document contains full findings of fact and reasons for the decision.  Pursuant to s.19A(11) of the TMA, this determination is final and conclusive.

Dr Christopher Staker

TRIBUNAL JUDGE

RELEASE DATE: 7 October 2010