[2011] UKFTT 687 (TC)
TC01529
Appeal number
TC/2010/06504
Capital
Gains Tax – Gift of property – CGT not paid by donor – Subsequent assessment on
donee under s 282 Taxation of Chargeable Gains Act 1992 –Whether subsequent assessment
for correct year – No – Appeal allowed
FIRST-TIER TRIBUNAL
TAX
ZOE
HAMAR Appellant
-
and -
THE
COMMISSIONERS FOR HER MAJESTY’S
REVENUE
AND CUSTOMS Respondents
TRIBUNAL: JOHN BROOKS (TRIBUNAL JUDGE)
RICHARD
CORKE FCA (MEMBER)
Sitting in public at Vintry
House, Wine Street, Bristol, BS1 on 8 September 2011
John Barnett of Burges Salmon
LLP for the Appellant
Colin Brown of HM Revenue and
Customs, for the Respondents
© CROWN COPYRIGHT
2011
DECISION
1. Mrs
Zoe Hamar appeals against an assessment to capital gains tax (“CGT”) for
2002-03 in the sum of £43,501.20 in respect of a chargeable capital gain of
£108,753.00. Mrs Hamar was notified of the assessment, which was made under s
282 of the Taxation of Chargeable Gains Act 1992 (“TCGA”), in a letter from HM
Revenue and Customs (“HMRC”) dated 18 August 2009.
Facts
2. Mr
Herbert Rogerson, Mrs Hamar’s father, owned three flats (Flats A, B and C) in
Ryde, Isle of White which he transferred to her by way of a gift. It appears
that, despite the transfer documentation showing a date of 2 December 2002, the
beneficial interest of Flat B was transferred to Mrs Hamar on 1 July 2000 and that
of Flats A and C transferred to her on 1 July 2002. These transfers gave rise
to a CGT liability which was not paid by Mr Rogerson before his unexpected death
on 22 June 2003.
3. Following
an enquiry by HMRC into the tax returns of the late Mr Rogerson an amendment
was made to his 2002-03 return on 25 July 2007. Although the CGT liability
arising out of the transfer of the flats was agreed with the deceased’s
personal representative, his son Mr Norman Rogerson, the CGT remained unpaid.
4. In
the absence of payment of the CGT liability on 18 August 2009 HMRC wrote to Mrs
Hamar with a Notice of Assessment, also dated 18 August 2009, made in
accordance with s 282 TCGA “FOR YEAR 2002-03 ENDING 5 APRIL 2003”. In addition as
HMRC sought interest calculated on the basis that it should have been paid by
31 January 2004 (see s 59B Taxes Management Act 1970 (“TMA”).
5. Until
she received the s 282 TCGA assessment Mrs Hamar was unaware of any outstanding
CGT liability in relation to her late father’s estate.
Section 282 TCGA
6. Insofar
as it is relevant to this appeal s 282 TCGA provides:
(1)
If in any year of assessment a chargeable gain accrues to any
person on the disposal of an asset by way of gift and any amount of capital
gains tax assessed on that person for that year of assessment is not paid
within 12 months from the date when the tax becomes payable, the donee may, by
an assessment made not later than 2 years from the date when the tax became
payable, be assessed and charged (in the name of the donor) to capital gains
tax on an amount not exceeding the amount of the chargeable gain so accruing,
and not exceeding the grossed up amount of that capital gains tax unpaid at the
time when he is so assessed, grossing up at the marginal rate of tax, that is
to say, taking capital gains tax on a chargeable gain at the amount which would
not have been chargeable but for that chargeable gain.
(2)
A person paying any amount of tax in pursuance of this section
shall be entitled to recover a sum of that amount from the donor.
(3)
References in this section to a donor include, in the case of an
individual who has died, references to his personal representatives.
Submissions
7. Mr
Barnett, for Mrs Hamar, challenges the assessment made under s 282 TCGA on the
basis that the underlying assessment on the late Mr Rogerson’s estate for
2002-03 was patently wrong in that it included an asset, Flat B, that had been
disposed of in 2000-01 and that HMRC had understated the valuations of the flats
used in the CGT computations. He contends that we are entitled to re-open and
consider the validity of the underlying assessment on Mr Rogerson’s estate and
relies on the decision of the Special Commissioner (Charles Hellier) in Courbally-Stourton
v HMRC [2008] STC (SCD) 907 and the Tribunal Judge (Barbara Mosedale) in Phillips
v HMRC [2010] SFTD 332 in support of this submission.
8. In
addition Mr Barnett submits that the assessment under s 282 TCGA should be for
2009-10 the year it was issued and not 2002-03 when the transfer of the legal
title to the flats to Mrs Hamar took place. This would mean that Mrs Hamar
would only be charged interest for her own default and not that of her father
and his estate.
9. For
HMRC, Mr Brown contends that s 282 TCGA is not a provision for bringing into
charge CGT following the disposal of an asset but an alternative means of
recovering a tax liability that has already become final and conclusive. He
submits that the details of the underlying gain are not relevant and, as such,
any right of appeal does not extend to the calculation of the liability giving
rise to the assessment on the donor or his personal representative and that
even if it did any question relating to the valuation of the flats it would be
a matter for the Upper Tribunal (see s 46D TMA).
Discussion and Conclusion
10. Given that a CGT
liability arose on Mr Rogerson (and subsequently his estate) as a result of a
chargeable gain on the disposal of the flats to Mrs Hamar by way of gift and
that this liability remained unpaid 12 months from the date when the tax became
payable, we consider that HMRC were entitled to raise the s 282 TCGA assessment
on Mrs Hamar (as the donee) on 18 August 2009 as it was made within two years
of the date that the tax became payable.
11. This raises the
issue of whether the s 282 TCGA assessment was made for 2002-03, as stated in
the Notice of Assessment, or in 2009-10 as Mr Barnett contends as it is clear from
the decision of the Court of Appeal in Baylis v Gregory [1987] STC 297 that it is not possible to treat an assessment made for one
year as an assessment for another.
12. As Slade LJ said
(at 323) in that case:
“I find it is impossible to say that an assessment
for one specified fiscal year can ever be or take effect as an assessment for
another fiscal year.”
13. Although s 282
TCGA refers to a chargeable gain accruing to any person in “any year of
assessment” and any amount of CGT assessed on that person “for that year of assessment”
remaining unpaid for 12 months it continues by making provision for the donee
of an asset, received by way of a gift, to be assessed and charged to CGT. The
assessment made under s 282 TCGA on the donee, although derived from the
assessment on the donor, is a distinct and different assessment from that on
the donor and s 282 TCGA does not specify the year for which the assessment on
the donee should be made.
14. Unlike other
assessing provisions (eg s 29 TMA) s 282 TCGA does not refer to gains or income
which ought to have been taxed or an assessment that has become insufficient or
excessive relief having been given. Its purpose is not to determine the
liability to CGT as this has already been finally and conclusively determined
by the assessment on the donor but to protect the public purse and provide a
mechanism to ensure that any outstanding CGT is paid in circumstances where the
donor of a gift has, despite being liable to CGT, failed to make payment of the
tax. The absence of any reference to a year of assessment in respect of the
assessment on the donee in s 282 TCGA, which could have been included if it
were intended to be the year in which the donor made the gift, leads us to the
conclusion that the assessment should only apply from the date, and therefore
for the year, in which it was made.
15. We find support
for our conclusion from s 282 TCGA itself which gives the person responsible
for payment of the CGT a statutory right to pursue the donor for “any amount
of tax in pursuance of this section” under s 282(2) TCGA (emphasis
added).
16. This may be
contrasted with the position of a shareholder who is connected with a company
and who receives or becomes entitled a capital distribution from the company
arising as a result of a disposal of assets in respect of which a chargeable
gain accrued to the company or the where distribution constitutes such a
disposal of assets. If following an assessment on the company corporation tax
is not paid within six months HMRC may issue an assessment on the shareholder,
under s 189 TCGA, to recover any unpaid corporation tax that has previously
been assessed on the company. If a shareholder has paid any amount of tax in
such circumstances s 189(4) provides that “he shall be entitled to recover
from the company a sum equal to that amount [of tax] together with
any interest paid by him …” (emphasis added).
17. We consider that
s 282 TCGA could, like s 189 TCGA, have included a reference for the recovery
of interest and would surely have done so had it been intended that the assessment
was to be for the year in which a gift was made and it was possible for interest
to be added to any CGT not paid by a donor.
18. A consequence of
our conclusion is that any charge to interest on the unpaid CGT, against which
there is no statutory right of appeal, can only be made from the date and in
the year the assessment was made. If this were not the case it would be
possible to arrive at an absurd situation where a person could become liable to
interest, with no right of recovery, on unpaid CGT for a period before an assessment
was made during which not only, as in this case, may he be unaware that CGT had
not been paid, but could become liable to pay interest for a period before any
liability to pay CGT had arisen!
19. Therefore in the
present case as the s 282 assessment was made on 18 August 2009 it must follow
that it was made for 2009-10 and not 2002-03. As an assessment for one
specified tax year can never be or take effect as an assessment for another tax
year it follows that the appeal against the 2002-03 s 282 TCGA assessment must
succeed.
20. The appeal is
therefore allowed.
21. In the
circumstances it is not therefore necessary for us to consider Mr Barnett’s
contention that we are entitled to re-open the underlying assessment or the
valuations used in the CGT computation to determine the amount of tax payable
under the s 282 TCGA assessment. However, we note that although Courbally-Stourton
and Phillips would appear to suggest that Mrs Hamar had a sufficient
interest to have been entitled to appeal against the amendment to her late
father’s tax return these authorities do not in our judgment provide support
for a re-consideration of the underlying assessment or the valuations used in
the CGT computation to determine the amount of tax payable under the s 282 TCGA
assessment.
22. 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: 28 October 2011
