[2011] UKFTT 251 (TC)
TC01115
Appeal number
TC/2009/15088
Appeal
against Regulation 80 of the Income Tax (Pay As You Earn) Regulations 2003
determinations and Section 8 Social Contributions (Transfer of Functions) Act
1999 decisions-Appellant appealed on basis that HMRC had not provided an
adequate breakdown of the amounts assessed appeal dismissed
FIRST-TIER TRIBUNAL
TAX
HARRISON
NEWS LTD Appellant
-
and -
THE
COMMISSIONERS FOR HER MAJESTY’S
REVENUE
AND CUSTOMS Respondents
TRIBUNAL:
S.M.G.RADFORD (TRIBUNAL JUDGE)
S.
CHEESMAN
Sitting in public at Holborn
Bars, London EC1N 2NQ on 9 November 2010
The Appellant did not appear
Mr J Corbett for the
Respondents
© CROWN COPYRIGHT
2011
DECISION
1. This
is an appeal against the Regulation 80 Income Tax (Pay as you earn) Regulations
2003 determinations (“Regulation 80 determinations”) made for the tax years
ending 5 April 2002 to 5 April 2007 in the amount of £59,288.95 and the
decisions made under Section 8 of the Social Contributions (Transfer of
Functions) Act 1999 (“Section 8 decisions”) that £43,428.54 of National
Insurance Contributions (“NIC”) was payable.
2. The
Tribunal tried to phone the directors of the Appellant without success and were
informed by the person answering the telephone at the Appellant’s contact
telephone number that the Appellant had been sold to another party.
3. The
Tribunal decided to go ahead with the hearing in the interests of fairness and
justice. Despite several reminders the Appellant had failed to produce a list
of documents and nothing had been heard from the Appellant’s directors since an
email to Mr Corbett on 22 June 2010 promising to reply to his letter in which
he had offered to reduce the assessments.
4. Mr
Corbett informed the Tribunal that despite this offer the Appellant had never
responded.
Legislation
5. Regulation
80 of the Income Tax (Pay As You Earn) Regulations is headed “The determination
of unpaid tax and appeal against determination. It states:
(1) This regulation applies
if it appears to the Inland Revenue that there may be tax payable for a tax
year under regulation 68 by an employer which has neither been—
(a)paid to the
Inland Revenue, nor
(b)certified
by the Inland Revenue under regulation 76, 77, 78 or 79.
(2) The Inland Revenue may
determine the amount of that tax to the best of their judgment, and serve
notice of their determination on the employer.
(3) A determination under
this regulation must not include tax in respect of which a direction under
regulation 72(5) has been made; and directions under that regulation do not
apply to tax determined under this regulation.
(4) A determination under this regulation may—
(a)cover the
tax payable by the employer under regulation 68 for any one or more tax periods
in a tax year, and
(b)extend to
the whole of that tax, or to such part of it as is payable in respect of—
(i)a class or
classes of employees specified in the notice of determination (without naming
the individual employees), or
(ii)one or
more named employees specified in the notice.
(5) A determination under
this regulation is subject to Parts 4, 5 (other than section 55) and 6 of TMA
(assessment, appeals, collection and recovery) as if—
(a)the
determination were an assessment, and
(b)the amount
of tax determined were income tax charged on the employer,
and those Parts of that Act apply accordingly
with any necessary modifications.
(6) For the purposes of paragraph 3(1)(a)
of Schedule 3 to TMA (rules for assigning proceedings to General
Commissioners), the relevant place for an appeal against a determination under
this regulation is the place where the determination was made.
6. Section
8 of the Social Contributions (Transfer of Functions) Act 1999 is headed
“Decisions by officers of Board” and states:
(1)Subject
to the provisions of this Part, it shall be for an officer of the Board—
(a)to
decide whether for the purposes of Parts I to V of the M1Social
Security Contributions and Benefits Act 1992 a person is or was an earner and,
if so, the category of earners in which he is or was to be included,
(b)to
decide whether a person is or was employed in employed earner’s employment for
the purposes of Part V of the Social Security Contributions and Benefits Act
1992 (industrial injuries),
(c)to
decide whether a person is or was liable to pay contributions of any particular
class and, if so, the amount that he is or was liable to pay,
(d)to
decide whether a person is or was entitled to pay contributions of any
particular class that he is or was not liable to pay and, if so, the amount
that he is or was entitled to pay,
(e)to
decide whether contributions of a particular class have been paid in respect of
any period,
Background and facts
7. Following
a PAYE inspection a meeting was held on 2 June 2004 at the registered office address of the Appellant. The registered office was at the home of Anil Pattni, a
director of the Appellant, and his mother, Tara Pattni, the bookkeeper. The
other employees were Mr J Pattni and his wife Mrs I Pattni together with some
casual employees who delivered the newspapers.
8. A
further meeting was held on the 4 June 2004 at the business address of the
Appellant, 28 Red Lion Street, Richmond.
9. Further
to these meetings it was discovered that the Appellant was paying personal
mobile phone bills for its employees.
10. In a letter
dated 23 September 2004 HMRC pointed out that the cost of the private calls
should be included in the employees’ gross pay for NIC purposes and for tax
purposes returned on forms P11D. It was clear that this had not been done up
until then. P11Ds had not been returned and therefore tax and NIC had been
underpaid.
11. Various further
details were requested from the Appellant in respect of the directors’ pay, the
possible provision of company cars for the directors and the payment of their
credit card bills.
12. By 14 December 2004 the details requested had still not been provided despite several
reminders and telephone calls and so the Employer Compliance Officer, Ms
Pellius- Gittens proposed that a further meeting should be held on 1 February 2005. The meeting was cancelled by Mr Pattni and although several further
meetings were scheduled these were all cancelled by Mr Pattni for various
reasons.
13. By letter dated 16 June 2005 having still not received that information requested and having been unable
to meet with the Appellant’s directors Ms Pellius- Gittens issued computations
in respect of the possible duties underpaid. These were in respect of the
mobile telephone bills, J.Pattni’s private car including petrol, personal
credit card payments made on behalf of J.Pattni, gross payments made without
the deduction of tax to individuals for newspaper deliveries and other payments
made to or on behalf of both J and A Pattni. She asked that she receive the
Appellant’s agreement to the figures within fourteen days.
14. On 20 June 2005
Mr Harvey, the Appellant’s accountant rang Ms Pellius-Gittens and told her that
the computations were grossly incorrect and he arranged a meeting which was due
to take place on 28 July 2005.
15. The meeting duly
took place and some further information was provided and on 4 August 2005 Ms Pellius-Gittens wrote again to the accountant. She said that she could
not accept the mileage logs as an accurate record of J.Pattni’s business
mileage as it appeared to show that Mr Pattni had undertaken newspaper rounds
on days that no newspapers were issued. She asked for further information and
sent further computations of the tax and NIC underpaid in the relevant years.
16. However by the 25 October 2007 despite further correspondence with the accountant and after a further
series of meetings cancelled by the Appellant directors or the accountant the
matter had still not been settled. When Ms Pellius-Gittens spoke to Mr Pattni
he said that he too had had problems with the accountant.
17. By 22 November 2007 matters had still not been settled despite numerous telephone calls and
attempts to set a meeting date. Ms Pellius –Gittens had had no further contact
with Mr Harvey. She therefore wrote to Mr A Pattni and told him that it was
imperative that the review was moved along and matters brought to a
satisfactory conclusion. She stated that if she had not heard from him by the
following Monday she would have no alternative but to issue formal assessments
to recover any unpaid tax and NICs based on her computations.
18. Although Mr
Pattni rang her on 27 November 2007 it was just to say that his brother was in Switzerland and they had been unable to speak to their accountant. They would therefore be
unable to provide any further information within her time limit.
19. On 16 January 2008 the assessments were made and it was concluded that the amounts payable
were £59,288.95 in respect of income tax and £43,428.54 in respect of NICs
making a total of £102,717.29.
20. These
computations were appealed by Mr A Pattni on the basis that he had been unable
to reach agreement with Ms Pellius-Gittens due to a lack of co-operation from
his accountant. He also requested that the amount payable be postponed.
21. Following this
appeal by Mr Pattni Ms Pellius-Gittens wrote to arrange a meeting. Meetings
were scheduled and cancelled both by Mr Pattni and the accountant who stated
that he had fallen down the stairs and hurt his back. A meeting finally took
place on 19 May 2008 and further to the meeting some records were received from
Mr A Pattni together with a letter dated 9 June 2008.
22. Further meetings
were scheduled and then cancelled by Mr Pattni or his accountant and on 15
October 2008 Ms Pellius-Gittens again wrote to Mr Pattni stating that due to
the length of time which had elapsed and as a result of the difficulties
encountered in resolving the differences she had decided that the matter should
be listed for hearing at the General Commissioners.
23. The hearing was
set for 10 December 2008 but did not go ahead as Mr A Pattni requested a
further meeting which was held on 9 February 2009 attended by Mr A Pattni, Mr Harvey the accountant, Ms Pellius –Gittens and K Kapoor from HMRC.
24. A further
hearing at the General Commissioners was arranged for 11 March 2009 but Ms Pellius-Gittens had a telephone call from Mr A Pattni who stated that he would
not be attending the hearing as he had not received any letter of confirmation
from the General Commissioners informing him of the date and time.
25. On 24 June 2009 Ms Pellius-Gittens wrote to Mr A Pattni and confirmed that despite meetings
and correspondence between them they had been unable to reach agreement. She
reiterated her final decision and confirmed her Regulation 80 determinations
that an amount of £59,288.95 of income tax was due and her Section 8 decisions
that an amount of £43,428.54 of NIC’s was due.
26. On 26 June 2009 Mr J Pattni requested a review of the decision.
27. The review was
completed on 14 September 2009. The reviewing officer, Pat Roberts, provided
details and computations of the amounts included in the assessments as he
believed that this was what had been requested by the Appellant. He varied some
of the tax assessments to reduce the amount charged on J Pattni for newspaper
deliveries to nil, to remove the amounts charged in respect of the year 2002/03
as these were now time-barred and to marginally reduce some of the other
assessments.
28. Payments to the
Starlight Restaurant had been noted in the bank statements and cheque stub
records. In the absence of evidence of reimbursements to the Appellant by J
Pattni and A Pattni the amount of income from the Starlight Restaurant (which
had been loaned money by the Appellant on behalf of the Pattnis) would stand as
additional pay to them.
29. He stated that
it was clear that the amounts deducted under PAYE for Mrs Pattni were
insufficient and further income tax was due so those assessments would stand.
30. He stated that
in respect of the NIC Class 1 computations made in respect of the mobile
telephones for the years 2002/03 to 2004/05 Mr A Pattni had agreed these so
they would stand. Although Mr A Pattni had agreed to check the figures for
2005/06 and 2006/07 he had not done so and so those figures too would stand.
31. In respect of
the Class 1 NICs, in relation to additional pay and credit card expenses for J
Pattni in the absence of reimbursement to the Appellant those assessments would
stand.
32. In respect of
the Class 1 NICs for Mrs I Pattni the mobile phone charge would stand for years
2002/03 to 2004/5 but as she had stopped using her mobile phone during 2005/06
he would reduce the NICs for 2005/06 and 2006/07 to nil.
33. On 16 October 2009 Jitendra Pattni made a late appeal of the reviewing officer’s decision to
the Tribunal on the grounds that the breakdown of the figures supplied was not
sufficient. He stated that the appeal was late as he had been unable to meet
with his accountant because Mr Harvey had fallen severely ill.
34. On 13 January 2010 Mr Corbett of HMRC, who had been appointed case worker in the matter wrote
to Mr Pattni and provided a breakdown of the amounts assessed. He also proposed
reducing some of the amounts to take account of the retail price index. He
asked for Mr Pattni’s agreement to these reduced assessments or, if actual
records of the payments made to or on behalf of Mr J Pattni and the Starlight
Restaurant along with the directors’ loan accounts and evidence of amounts
reimbursed to the Appellant were now available, that they be forwarded to him
for further consideration.
35. No reply was
received from the Appellant and so a statement of case was issued by HMRC on 24 February 2010. Directions were made on 22 March 2010.
36. A letter dated 14 April 2010 was received by the Tribunal from the Appellant stating their dates to
avoid, witnesses to be called and estimated time needed for the hearing.
37. On 21 June 2010 Mr A Pattni telephoned Mr Corbett to say that he would be replying to his
letter and that the reason for the delay was that the accountant who had all
the relevant papers was in hospital. Nothing further was heard from the
Appellant after that and despite numerous reminders the Appellant failed to
produce its list of documents.
Appellant’s Submissions
38. The Appellant’s
director originally appealed on the basis that he would like to reach a
settlement with HMRC and thus far had been unable to do so due to a lack of
co-operation from his accountant.
39. He then
submitted that HMRC had not provided him with a detailed breakdown of their
computations and had not taken additional information provided into account.
40. The Appellant
further contended that some payments had been reimbursed and that the rest were
dealt with through the director’s loan account.
HMRC’s Submissions
41. HMRC submitted
that the Appellant had provided no evidence of reimbursement either through the
directors’ loan accounts or directly to the company and the onus of proof
rested on the Appellant.
Findings
42. The Tribunal
found that the Regulation 80 determinations and the Section 8 decisions had
been reasonably made by Ms Pellius-Gittens in the light of the information and
records she had received.
43. The Tribunal
found that the Appellant had been given years to provide the required evidence
and HMRC had shown extraordinary patience in accepting all the cancelled
meetings and broken promises.
44. The Appellant
blamed the illness of its accountant which appeared to have been ongoing since
May 2008 when he fell down the stairs but the Tribunal found that the Appellant’s
directors were both fully aware of HMRC’s computations and how they had been
reached.
45. The Tribunal
found that the Appellant’s directors, having submitted the appeal, were quite
capable of providing evidence to refute HMRC’s conclusions were such evidence
available.
Decision
46. In the light of
the period of time allowed by HMRC to the Appellant to provide any available
evidence and, despite this the absence of any evidence from the Appellant, the
Tribunal decided that the Regulation 80 assessments and the Section 8 decisions
should stand and they are hereby confirmed in the amounts stated in paragraph 1
above. The appeal is hereby dismissed.
47. 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.
TRIBUNAL JUDGE
RELEASE DATE: 15 APRIL 2011
