[2010] UKFTT 588 (TC)

TC00838

Appeal number: TC/2009/10976

Application for further postponement – Previous decision set aside – Appeal against assessments and amendment – no evidence proffered by Appellant who did not attend hearing – Further postponement refused – Appeal heard in absence of Appellant – Appeal dismissed

FIRST-TIER TRIBUNAL

TAX

P A MALONEY TRADING AS

ADVANCED PROPERTY SERVICES Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL: JOHN BROOKS (TRIBUNAL JUDGE) NORAH CLARKE (MEMBER)

Sitting in public at Eastgate House, Cardiff on 9 November 2010

The Appellant did not appear and was not represented

Peter Massey of HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

History of proceedings

1.     On 17 November 2008 Mr Paul Alfonso Maloney, trading as Advanced Property Services, appealed against assessments and amendments made by HM Revenue and Customs (“HMRC”) on 11 February 2008. Although late, these appeals were accepted by HMRC but were not able to be heard by the General Commissioners before their abolition and the establishment of the Tax Chamber of the First-tier Tribunal (the “Tribunal”) on 1 April 2009. As “current proceedings”, the appeals have come before us by virtue of paragraph 6 schedule 3 of the Transfer of Tribunal Functions and Revenue and Customs Appeal Order 2009.

2.     Directions were made by the Tribunal on 30 April 2009 under which both parties were to provide to each other and the Tribunal dates to avoid for a hearing prior to 30 September 2009. The letter of 30 April 2009 from the Tribunal to Mr Maloney sending these directions to him also asked him to inform the Tribunal “when you will be unavailable between 15 June and 30 September 2009.” On 15 June 2009 Mr Maloney telephoned the Tribunal but it seems that he did not leave a message and it was not possible to contact him. On 22 June 2009 he called the Tribunal again to ask for the hearing to be as late as possible as his son was in hospital. On 20 July 2009 the Tribunal wrote to Mr Maloney to notify him that arrangements had been made for his appeal to be heard on 24 September 2009 in Cardiff.

3.     However, on 23 September 2009 Mr Maloney telephoned the Tribunal to request that the hearing be postponed as his son was in hospital. This request, which was confirmed by Mr Maloney in an email to the Tribunal, was granted and the hearing listed for 24 September 2009 was vacated and re-arranged for 15 December 2009 in Cardiff. This hearing was also postponed at the request of Mr Maloney, with the agreement of HMRC. Mr Maloney explained that due to his son undergoing chemotherapy he would be unable to attend a hearing until January 2010. A new date for the appeal was arranged during a telephone conversation between Mr Maloney and a clerk to the Tribunal on 25 January 2010 in which Mr Maloney agreed a hearing date in Cardiff of 7 April 2010.

4.     Although this date was confirmed by the letter of 26 January 2010 from the Tribunal to Mr Maloney he did not attend the hearing on 7 April 2010. On the morning of the hearing the Tribunal clerk tried, unsuccessfully, to contact Mr Maloney by telephone. However, the Tribunal was satisfied that, as the date had been agreed by Mr Maloney, reasonable steps had been taken to notify him of the hearing and considered that as it was in the interests of justice to do so, decided to hear the appeal in his absence under Rule 33 of the Tribunal Procedure (First-tier Tribunal)(Tax Chamber) Rules 2009 (the “Rules”). The appeal was dismissed and the decision was issued on 16 April 2010.

5.     On 3 June 2010 Mr Maloney’s newly appointed accountant, Mr Thomas of Mike Thomas Accountancy Services, wrote to the Tribunal making two applications. First, for the decision to be set aside pursuant to Rule 38 of the Rules which was out of time; and secondly for permission to appeal to the Upper Tribunal but did not provide either grounds of appeal or identify an error of law.

6.     The letter explained that Mr Maloney could not attend the hearing on 7 April 2010 “due to the fact he had to attend at the hospital where his son was undergoing chemotherapy for cancer.”

7.     It is clear from the decision on the application for set aside that had a letter in the terms of that from his accountant; or a message been received by the Tribunal; or even if the clerk had managed to speak with Mr Maloney on the morning of the hearing and the situation been explained, a further postponement would have been allowed to provide him with an opportunity to produce evidence to the Tribunal in support of his appeal. In the circumstances the application for set aside was admitted despite it being late and the decision, issued on 16 April 2010 was set aside in the interests of justice. In granting the application to set aside the decision it was noted that Mr Maloney had retained a professional adviser which should ensure that the matter is dealt with properly without further delays. Mr Maloney and his advisor were also warned “that any further delay in this appeal may result in the proceedings being struck out because of lack of co-operation with the Tribunal.”

8.     On 1 July 2010 the parties were notified by a letter from the Tribunal that the decision issued on 16 April 2010 had been set aside. The letter from the Tribunal also asked the parties for “any dates to avoid for a hearing.” On 29 July 2010 the Tribunal wrote to the parties to notify them that arrangements have been made for the appeal to be heard in Cardiff on 9 November 2010.”

9.     An email was sent to the Tribunal on Mr Maloney’s behalf on 5 November 2010 stating:

Just to confirm that Mr Maloney cannot attend court hearing on 9^th November 2010 due to being in The Royal Orthopaedic Hospital in Birmingham with his son … [who] has had operation on his leg which is now infected so he’s got to stay in hospital for another week with IV Antibiotics which Mr Maloney has to stay with him as his parent … can you rearrange another date? Can you deal with this urgently please.

10.  On 8 November Mr Maloney telephoned the Tribunal to say that he would not attend the hearing on 9 November 2010 and asked for a further postponement. He explained that he was concerned that HMRC were aware of his son’s situation but were still opposing his application for a postponement and was keen for the judge to understand the severity of his son’s condition.

Postponement Application

11.  As Mr Maloney did not attend the hearing on 9 November 2010 the first matter for us to consider was whether we should grant a further postponement, strike out the proceedings, in view of the warning given when the previous decision was set aside, or proceed with the appeal in his absence under Rule 33 of the Rules.

12.  In addition to his telephone call to the Tribunal on 8 November 2010 and the email sent on his behalf on 5 November 2010, Mr Maloney provided us with a copy of an x-ray of a metal rod in his son’s leg, which we understand has become infected lengthening his stay in hospital, and a copy of a letter, dated 13 October 2010, from The Royal Orthopaedic Hospital Oncology Service in Birmingham stating that arrangements have been made for his son’s admission to the hospital on 17 October 2010.

13.  Mr Massey explained that although HMRC had “great sympathy” for Mr Maloney and understood that “the illness of a child brings with it significant practical and emotional difficulties” he reluctantly opposed the application for a further postponement as Mr Maloney had not taken any steps to progress the appeal since the decision had been set aside. He suggested that we proceed to hear the appeal in Mr Maloney’s absence under Rule 33 of the Rules as opposed to striking out the proceedings despite the warning given when the previous decision was set aside contending that, as it would be in the interests of justice to allow Mr Maloney to make representations regarding the appeal being struck out, further delays would be inevitable and given that Mr Maloney had not taken any steps to progress the appeal during the previous eighteen months it was unlikely that he would do so in the future and that only a hearing in his absence would finally resolve the matter.

14.  We also heard from Mr Stephen Evans, an Inspector of Taxes who is HMRC’s case officer in this matter. He told us he had written to Mr Maloney following the release of the Tribunal’s decision, on 16 April 2010, explaining its effect and giving him advice on how to pay the tax which had until then been stood over pending the outcome of the appeal.

15.  On 4 June 2010 Mr Evans received a fax from a Mr Thomas of Mike Thomas Accountancy Services informing Mr Evans that he had been engaged by Mr Maloney to appeal against the Tribunal’s decision. This was followed by a letter from Mr Thomas, dated 20 June 2010, which explained that Mr Maloney was unable to attend the hearing on 7 April 2010 as he was with his son who had to attend hospital for urgent treatment and that an application was being made to the Tribunal. The letter also sought a meeting with Mr Evans if the application succeeded.

16.  As we have already noted the application to set aside the previous decision in this case was successful. On hearing this Mr Evans, who was himself shortly to be admitted to hospital, arranged for collection of the tax to be stood over pending the outcome of the new appeal and provided Mr Thomas with a copy of the bundles prepared for the 7 April 2010 hearing, summaries of amounts banked by Mr Maloney for the four years ending 30 April 2005 and copies of Mr Maloney’s self-assessment tax returns for 2004 and 2005.

17.  On his return to work, on 4 October 2010, Mr Evans telephoned Mr Thomas and, even though there appeared to have been no progress, a meeting was arranged for 7 October 2010. During that meeting Mr Thomas had told Mr Evans that in August 2010 he, Mr Thomas, had made several appointments to meet with Mr Maloney which Mr Maloney had not kept. Mr Thomas had therefore gone to Mr Maloney’s home to discuss the situation and had advised Mr Maloney of the need for documentary evidence which Mr Maloney had promised to obtain. Mr Thomas had not heard from Mr Maloney by early September 2010 but, after several unsuccessful attempts managed to contact him on 14 September 2010. Arrangements were made for Mr Thomas to call on him the next day but before he was able to do so Mr Thomas received a text message from Mr Maloney to say that he was in London following a family bereavement. Mr Thomas was unable to make any further contact with Mr Maloney until after he had received the telephone call from Mr Evans on 4 October 2010. Mr Thomas told Mr Evans that Mr Maloney had told him that a meeting had been arranged with his solicitor and that he would contact Mr Thomas after that meeting and provide him with the business records to 30 April 2006. Mr Thomas had not heard from Mr Maloney since.

18.  However, Mr Maloney telephoned Mr Evans on 8 October 2010 but as Mr Evans was not available he telephoned again on 11 October 2010 to say that Mr Thomas had advised him to call. Mr Evans said that he told Mr Maloney what was required from him to allow the appeals to be considered and that Mr Maloney accepted responsibility for the delay but said that this had not been helped by his son’s treatment and the family bereavement. Mr Maloney also told Mr Evans that he did not hold his business records and suggested that these might still be held by his previous accountant.

19.  On 29 October 2010 Mr Evans received a telephone call from Mr Thomas to say that as he had not received any co-operation from Mr Maloney either in regard to meetings or providing business records, he was no longer acting. Following that conversation Mr Evans has had no further contact with either Mr Maloney or his accountant.

20.  We did not hear from Mr Thomas, the accountant, who did not provide Mr Evans with written confirmation or reasons to say why he is no longer acting for Mr Maloney. However, as Rule 15(2)(a) of the Rules provides that the Tribunal may “admit evidence whether or not the evidence would be admissible in a civil trial in the United Kingdom” we accept Mr Evans’ account of what he was told by Mr Thomas regarding Mr Maloney’s lack of co-operation.

21.  We are also mindful that when the previous decision was set aside it was noted that as a professional adviser had been appointed it “should ensure that this matter is now dealt with properly without any further delays” but note that because of Mr Maloney this has not been the case.

22.  Although we first considered whether the proceedings should be struck out under Rule 8(3)(b) of the Rules in view of the warning to Mr Maloney when the previous decision was set aside, that “any further delay may result in the proceedings being struck out because of lack of co-operation with the Tribunal” we accepted Mr Massey’s contention that to do so may have caused yet further delay in view of Mr Maloney’s lack of co-operation and felt that it was fair and just for the matter to proceed to a hearing. Therefore the issue for us was whether or not that hearing should proceed in Mr Maloney’s absence.

23.  Rule 33 of the Rules  provides that if “a party fails to attend a hearing the Tribunal may proceed with the hearing if the Tribunal—

(a)        is satisfied that the party has been notified of the hearing or that reasonable steps have been taken to notify the party of the hearing and;

(b)        considers it is in the interests of justice to proceed with the hearing

24.  In view of the emails on 5 November 2010 and Mr Maloney’s telephone calls to the Tribunal on 8 November it is clear that Mr Maloney was aware of the date of this hearing. We are therefore satisfied that he has been notified of the hearing.

25.  Although we do understand and appreciate the severity of his son’s condition and sympathise with Mr Maloney we considered that, on balance, it was in the interests of justice to proceed with the hearing in his absence given the lack of progress, not only since the appeals were made in November 2008 but especially since the previous decision was set aside and a new representative was appointed.

26.  In reaching this conclusion we have had regard to the overriding objective of the Rules (Rule 2) which requires us to deal with cases “fairly and justly” and to which we must seek to give effect when exercising any power under the Rules (Rule 2(3)(a)), such as proceeding in the absence of a party under Rule 33. We are particularly mindful of Rule 2(2)(e) which refers to “avoiding delay, so far as compatible with proper consideration of the issues” given that Mr Maloney does not have any business records in his possession and was unable to locate or produce these to Mr Thomas and would therefore be unlikely to be able to do so for a re-listed hearing.

27.  The application for a further postponement is therefore refused.

Appeal

28.  On 11 February 2008, following an enquiry into Mr Maloney’s 2005-06 self-assessment tax return HMRC made the following assessments and amendments:

2003-04 – an assessment charging tax of £21,769.72;

2004-05 – an assessment charging tax of £58,069.33;

2005-06 – an amendment to self-assessment charging tax of £26,842.84 made under s 9C(2) Taxes Management Act 1970 (“TMA”) (the “Jeopardy Assessment”); and

2005-06 – an amendment to self-assessment charging tax of £26,842.84 made under s 28A TMA.

29.  At the commencement of the appeal hearing Mr Massey, who appeared before us for HMRC, formally withdrew the Jeopardy Assessment which had been replaced by amendment to self-assessment made under s 28A TMA.

30.  Mr Maloney, who describes the business Advanced Property Services as  “property refurbishment and sales” in his self-assessment tax returns, appealed against these assessment and amendments on 17 November 2008 on the grounds that in each year, the figures were not in accordance with the work undertaken.

Evidence

31.  In addition to hearing the oral evidence of Mr Stephen Evans, HM Inspector of Taxes, we were provided with a bundle of documents, in two volumes, which included copies of Mr Maloney’s Halifax bank statements.

32.   Mr Evans told us that he opened the enquiry into Mr Maloney’s 2005-06 self-assessment tax return affairs as the result of a referral by HMRC’s Compliance Unit who had been carrying out enquiries into payments made to employees and sub-contractors engaged by Mr Maloney. When he analysed Mr Maloney’s bank statements he had found that the amounts banked, which include cash, cheques and CHAPS credits, exceeded the sales figure declared by Mr Maloney in his return. He noted that transfers had been made into the account and that there had been cash withdrawals often amounting to several thousand pounds in a week.

33.  In the light of his findings Mr Evans made assessments to the best of his judgment drawing inferences from the information available to him to gross up the figures where bank details were not available for a complete year; to include a “reasonable figure” to represent unbanked cash sales used to pay employees and subcontractors where no such withdrawals are evident from the bank statements; and by taking account of the likelihood of sales banked in another account from which transfers were made into Mr Maloney’s Halifax account.

34.  No evidence was provided by or on behalf of Mr Maloney to contradict the assessments.

Law

35.  With regard to assessments, in Johnson v Scott [1978] STC 48, Walton J, in a passage approved by the Court of Appeal ([1978] STC 476 at 484) in that case, said at 56 – 57:

“Indeed, it is quite impossible to see how the Crown, in cases of this kind, could do anything else but attempt to draw inferences. The true facts are known, presumably, if known at all, to one person only, the taxpayer himself. If once it is clear that he has not put before the tax authorities the full amount of his income, as on the quite clear inferences of fact to be made in the present case he has not, what can then be done? Of course all estimates are unsatisfactory; of course they will always be open to challenge in points of detail; and of course they may well be under-estimates rather than over-estimates as well. But what the Crown has to do in such a situation is, on the known facts, to make reasonable inferences. When, in paragraph 7(b) of the case stated, the commissioners state that (with certain exceptions) the inspector's figures were 'fair' that is, in my judgment, precisely and exactly what they ought to be, fair. The fact that the onus is on the taxpayer to displace the assessment is not intended to give the Crown carte blanche to make wild or extravagant claims. Where an inference of whatever nature falls to be made, one invariably speaks of a 'fair' inference. Where, as is the case in this matter, figures have to be inferred, what has to be made is a 'fair' inference as to what such figures may have been. The figures themselves must be fair.”

36.  Section 50(6) TMA provides:

If, on an appeal notified to the tribunal, the tribunal decides—

(a) that, … the appellant is overcharged by a self-assessment;

(b) …

(c) that the appellant is over charged by an assessment other than a self-assessment,

the assessment or amounts  shall be reduced accordingly, but otherwise the assessment or statement shall stand good.

37.  In the decision of the Court of Appeal in T Haythornwaite  & Sons v Kelly (HM Inspector of Taxes) (1927) 11 TC 657 Lord Hanworth MR, referring to a previous incarnation of this enactment, said, at 667:

“Now it is to be remembered that under the law as it stands the duty of the Commissioners [and since 1 April 2009 the Tribunal] who hear the appeal is this: Parties are entitled to produce any lawful evidence, and if on appeal it appears to a majority of the Commissioners by examination of the Appellant on oath or affirmation, or by other lawful evidence, that the Appellant is over-charged by any assessment, the Commissioners shall abate or reduce the assessment accordingly; but otherwise every assessment or surcharge shall stand good. Hence it is quite plain that the Commissioners are to hold the assessment as standing goods unless the subject – the Appellant – establishes before the Commissioners, by evidence satisfactory to them, that the assessment ought to be reduced or set aside.”

38.  A more recent example of the effect of s 50(6) TMA can be seen in the decision of the Special Commissioner (Dr John Avery Jones) in M E Walsh v HMRC [2008] UKSPC SPC676, where he said, at [7]:

“The Appellant has offered me no evidence from which I could conclude that the Appellant was overcharged by the amended self-assessment and accordingly it must stand good.”

Discussion and Conclusion

39.  We accept and find that in making the assessments and amendment with which this appeal is concerned Mr Evans made reasonable and fair inferences from the information available to him. As no evidence was provided by or on behalf of Mr Maloney  on which we could conclude that he was overcharged by these assessments and the amendment to his self-assessment they must stand good.

40.  Therefore, other than the Jeopardy Assessment which was formally withdrawn at the commencement of the appeal hearing, we confirm the assessments and  dismiss the appeal.

41.  This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  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.

JOHN BROOKS

TRIBUNAL JUDGE

RELEASE DATE:  23 November 2010