[2011] UKFTT 23 (TC)

TC00900

Appeal number: 2010/6537

INCOME TAX – INFORMATION NOTICE & ASSOCIATED PENALTY  - Appellants failed to provide information and documents as required by Information Notices under schedule 36 Finance Act 2008 – Tribunal satisfied that the information and documents were reasonably required to complete their enquiries – No reasonable excuse for the penalty – Appeal dismissed

FIRST-TIER TRIBUNAL

TAX

MR C V CARDEN & MRS J CARDEN Appellants

t/a PLATINUM WORLD TRAVEL

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL: MICHAEL TILDESLEY OBE (TRIBUNAL JUDGE)

Sitting in public at Alexandra House, 14-22 The Parsonage, Manchester M3 2JA on 17 December 2010

The Appellants did not appear

Bryan Morgan, Presenting Officer, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for HMRC

© CROWN COPYRIGHT 2010

DECISION

The Appeal

1.       The Appellants appealed against HMRC decision on review dated 22 June 2010 upholding the issue of information notices and the imposition of penalties in the sums of ₤300 for non-compliance with the notices against each Appellant.

2.       The Appeal notice was lodged with the Tribunal on 12 August 2010 which was outside the 30 day time limit for appealing. The reason for the delay was that the notice submitted on 22 July 2010 did not include a copy of the disputed decision. HMRC did not object to the Appellants’ application for an extension of time in which to lodge the Appeal notice. The Tribunal granted an extension of time until 12 August 2010 for receipt of the said notice. 

3.       Although the Appeal notice was signed by Mr Carden, the Tribunal decided that the Appeal related to the decision against Mrs Carden as well as Mr Carden. The notice stated that it was an appeal against penalties of ₤300 x 2. Mrs Carden had informed HMRC that Mr Carden was acting for her.

4.       The Appellants did not attend the hearing on 17 December 2010 of which they had been notified by post at the address given in the Appeal notice. The Appellants provided no explanation for their non-attendance. The Tribunal decided in those circumstances that it was in the interests of justice to proceed with the hearing in the absence of the Appellants in accordance with rule 33 of the Tribunal Rules 2009.

The Facts

5.       On 15 January 2009 HMRC opened an enquiry into the partnership tax return of Platinum World Travel for the year ended 5 April 2007. The Appellants were the partners of Platinum World Travel.

6.       On 21 May 2009 Mr Whitaker of HMRC requested from the Appellants copies of private bank statements to verify the origin of the capital invested in the partnership and the sources of income available to the Appellants to support their day-to-day living costs.  The Appellants ignored the request.

7.       On 29 July 2009 Mr Whitaker issued to each Appellant a Notice to Provide Information and Produce Documents under paragraph 1 schedule 36 of the Finance Act 2008. The Notice required the Appellants to provide by 28 August 2009:

(1)        A completed declaration and certificate of all bank accounts held during the period 6 April 2006 to 5 April 2007.

(2)        Bank statements for all accounts included on the declaration to cover the period 6 April 2006 to 5 April 2007.

8.       On 11 September 2009 Mr Whitaker sent a letter to the Appellants advising them that they had not complied with the Notice and that if HMRC did not receive the information requested by 22 September 2009 a penalty in the sum of ₤300 would be imposed against each of them.

9.       On 22 September 2009 Mr Carden spoke with Mr Whittaker confirming he would provide the requisite information. Mr Carden, however, expressed concern about the costs of providing statements and questioned the value of the requested documentation for the purpose of the enquiry by HMRC. During the conversation Mr Carden mentioned the sale of Spanish properties. Mr Carden supplied Mr Whitaker with copies of internet schedules of the partnership account with Lloyds Bank.

10.    On 12 October 2009 Mr Whitaker responded to Mr Carden’s telephone call and the information supplied. Mr Whitaker repeated his request for a list of all bank accounts held by Mr and Mrs Cardin during the period 6 April 2006 to 5 April 2007 and copies of the statements relating to the accounts listed by 13 November 2009. Mr Whitaker’s reasons for the list and statements were as  follows:

(1)        Discrepancies between the sales figure of ₤17,000 for the partnership and the value of the deposits to the tune of ₤20,000 in the business account.

(2)        The unknown origin of general deposits to the value of ₤36,000 in Mr Cardin’s personal account.

(3)        The sources of transfers to the value of ₤186,000 recorded in the accounts.

(4)        The inability to reconcile the capital investment of ₤130,000 appearing in the published accounts for the partnership with the information provided.

11.    On 13 November 2009 Mr Carden sent an e mail to Mr Whitaker advising that he no longer had access to the on-line banking with Lloyds and could not afford to pay for the cost of statements from the bank. Mr Carden pointed out that he had offered to give his consent to HMRC to inspect the Lloyds Bank account but Mr Whitaker had declined to take up his offer. In those circumstances Mr Carden did not see how he could assist Mr Whitaker further. Mr Carden suggested that the enquiry be put on hold until he had the necessary finances for obtaining the statements.

12.    On 17 November 2009 Mr Whitaker responded to Mr Carden with a copy to Mrs Carden pointing out that even if HMRC approached Lloyds Bank for copy statements, the costs of providing them would still fall on Mr and Mrs Carden.

13.    On 18 November 2009 a penalty notice in the sum of ₤300 for failing to comply with the Notice dated 29 July 2009 was issued against each Appellant.

14.    Mr and Mrs Carden appealed against the penalty notices on the 16 and 17 December 2009 respectively. They accepted an offer of a review of the decision by HMRC. Mr Carden at the same time provided HMRC with details of the sale of the Spanish property on 17 March 2005.

15.    Mr Whittaker offered to meet with Mr Carden on four separate occasions, 22 September 2009, 22 December 2009, 11 January 2010 and 22 March 2010 to progress matters. Mr Carden did not take up the opportunity of a meeting.

Reasons

16.    Under paragraph 1 schedule 36 of the Finance Act 2008 an HMRC officer may by notice require a person to provide information or produce a document if the information or document is reasonably required by the officer for the purpose of checking the taxpayer’s tax position.

17.    HMRC was unable to reconcile the profit and loss account for the partnership in the year 2006/07 with the underlying records. The specific areas of concern were identified in Mr Whitaker’s letter dated 21 May 2009 and amplified in his subsequent letter of 12 October 2009.  The Appellants have not supplied a satisfactory explanation for the discrepancies identified by HMRC. In those circumstances the Tribunal is satisfied that the provision of certified lists of bank accounts held by the Appellants and copies of the associated bank statements is reasonably required to resolve the outstanding matters in respect of the Appellants’ tax liabilities for 2006/07.

18.    Under paragraph 39 schedule 36 of the Finance Act 2008 a person who fails to comply with an information notice is liable to a penalty of ₤300.  The size of the penalty is fixed by statute. HMRC and the Tribunal have no powers to impose a lesser penalty or mitigate the penalty.

19.    The Tribunal can, however, waive the penalty if it is satisfied that the person has a reasonable excuse for his failure to provide the information and or documents requested by the schedule 36 information notice (paragraph 45 schedule 36 of the Finance Act 2008.  The term reasonable excuse is not defined by statute except that insufficiency of funds and reliance on others cannot constitute a reasonable excuse (paragraph 45(2) schedule 36).

20.    The Tribunal finds that Mr and Mrs Carden did not comply with the information notices dated 29 July 2009. They have not supplied HMRC with a certified list of bank accounts held and only copies of  a Lloyds bank statement of an account in the name of the partnership has been provided. The Appellants’ reasons for not supplying the necessary information were the costs and difficulties of acquiring the bank statements. The Tribunal finds that the reasons put forward did not explain their failure to supply a certified list of bank accounts which would require no expense for compilation.  Further the Appellants’ purported insufficiency of funds to pay for the bank statements cannot in law amount to a reasonable excuse.

Decision

21.    The Tribunal holds for the above reasons:

(1)        The request for information and documents from the Appellants in the  Information Notices dated  29 July 2009 were reasonably required by HMRC for the purpose of checking the Appellants’ tax positions for 2006/07.

(2)        The Appellants failed to comply with the requirements of the Information Notices dated 29 July 2009.

(3)        The Appellants had no reasonable excuse for their failures to comply with the Information Notices.

22.    The Tribunal, therefore, dismisses the Appeal and upholds the penalty of ₤300 against each Appellant.

23.    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.

MICHAEL TILDESLEY OBE

TRIBUNAL JUDGE

RELEASE DATE: 22 December 2010