DECISION
1.
The Appellant, Michael Williams appeals against the refusal by HMRC to
allow deductions from his employment income for certain travel and subsistence
for years of assessment 2002-2003, 2003-2004 and 2004-2005.
2.
As we shall describe, the claims arise predominantly in relation to
travelling expenses incurred by Mr Williams on travel between his home in Colwyn Bay and lodgings and his work variously as a miner (or tunneller) and as a dumper driver
and concreter in the construction of terminal 5 at Heathrow. The claims are
for expenses of £5,375 for tax year 2002-2003, £7,730 for 2003-2004 and £7,915
(travel) and £1,803 (subsistence) for 2005-2006.
Absence of Mr Williams
3.
The hearing came on at 10.30 am. At that time Mr Williams had not
appeared, and there was no appearance of any representative for Mr Williams.
The Tribunal clerk telephoned the mobile number for Mr Williams on the Tribunal
file, but the call went straight through to voicemail.
4.
There is some history to this appeal which I should briefly summarise.
It was originally listed to be heard in Colwyn Bay on 8 October 2010. That hearing
was postponed because HMRC were unable to produce the necessary bundles in the
absence of documents that were to be provided by Mr Williams.
5.
It was then re-listed to be heard on 12 January 2011, again at Colwyn Bay. That hearing was postponed on the application of Mr Williams on the basis that
he was working in London for a period including the hearing date.
6.
The appeal was listed again, this time at Prestatyn, on 11 May 2011.
The parties were informed by letter from the Tribunal dated 29 March 2011. On
7 April 2011 Mr Williams wrote to the Tribunal to say that he was starting work
in London on 2 May 2011 and that in view of this, and the fact that his
accountant lived in Chelsea, he enquired if it would be possible for the
hearing to be in London. That enquiry was treated as an application, which was
refused. Mr Williams was informed by letter of 21 April 2011, but it appears
that he did not receive this letter. Mr Williams wrote again to the Tribunal
on 6 May 2011 requesting a London hearing.
7.
The hearing on 11 May 2011 went ahead. The Tribunal on that day decided
to proceed in Mr Williams’ absence. It dismissed Mr Williams’ appeal by
decision notice released on 1 June 2011.
8.
Following an application by Mr Williams, Judge Cannan decided, following
a hearing on 19 December 2011, to set aside the decision of the original
tribunal of 1 June 2011 and directed a further hearing.
9.
By letters dated 11 April 2012, the Tribunal informed both parties that
the case would be heard in London on 24 May 2012. The letter to Mr Williams
was addressed to his full home address in Colwyn Bay as on the Tribunal file.
No application or request for any further adjournment was received from Mr
Williams, nor indeed any other correspondence.
10.
In these circumstances it fell to me to consider whether the Tribunal
should proceed with the hearing in Mr Williams’ absence. Two conditions are
required to be satisfied under rule 33 of the Tribunal Procedure (First-tier
Tribunal) (Tax Chamber) Rules 2009. The first is whether I was satisfied that
Mr Williams had been notified of the hearing or that reasonable steps had been
taken to notify Mr Williams of the hearing. In this regard, I cannot say
whether Mr Williams received the Tribunal notification of 11 April 2012. There
is no correspondence from him to the Tribunal after that date. Nonetheless, I
was satisfied that the Tribunal took reasonable steps to notify Mr Williams;
the letter of 11 April 2012 was properly addressed to his address on the
Tribunal file.
11.
The second condition is whether I considered that it was in the
interests of justice to proceed. I concluded that it was. This is a case that
has been under appeal since September 2009. A number of abortive attempts were
made to list it, and when a hearing was listed Mr Williams was unable to
attend, and asked for a postponement. This hearing itself results from the
Tribunal exercising its discretion in favour of Mr Williams to allow the
original decision to be set aside, and the whole matter re-heard. In those
circumstances, although the absence of Mr Williams is regrettable, as I would
have appreciated the opportunity to ask him for more details of his work at
Heathrow, and his understanding of the nature and location of his work under
his contract at various points, I concluded that it would not be right to
countenance further delay, and that it was in the interests of justice to
proceed with the hearing.
The appeal
12.
In this appeal there are two issues for me to consider:
(1)
The first is whether Mr Williams is entitled, as a matter of law, to
deductions for the expenses claimed, or HMRC are right to deny him those
deductions. This applies to all the years of assessment in question.
(2)
The second, which applies to the assessments for the years 2002-2003 and
2003-2004, is whether HMRC was entitled to make discovery assessment for those
years.
The facts
13.
In the absence of evidence from Mr Williams, I must determine the
material facts from a combination of documents, including in particular the
contract of employment under which Mr Williams worked in the relevant period,
correspondence passing between Mr Williams and his advisers and HMRC, and notes
of telephone conversations between HMRC officers and Mr Williams. In doing so,
and without the ability to question Mr Williams on his own understanding and
expectations, I have had to draw certain inferences in those respects. My
findings are as follows.
14.
At the material times Mr Williams resided at an address in Colwyn Bay.
15.
From 16 September 2002 to June 2005 (a total of 33 months) Mr Williams
worked at Heathrow airport, on the terminal 5 construction. In June 2005 he
was made redundant.
16.
Mr Williams had a contract of employment with his employer, Morgan Est
Plc, for the work he carried out. That contract (in the form of a statement of
particulars of main terms of employment) was issued on 20 September 2002. The
material terms were:
“1c Place of work … Heathrow
At any time during your employment you may be
transferred from one job or site subject to Working Rule 14 [I did not have
copies of the Working Rules.]
2 Name
of Employee: Michael Williams Job Title: Miner
The job title is not definitive; you may be required
to carry out alternative work from time to time. Working Rule 17.3
13 Length of Notice of Termination to be given by
Employer: Working Rule 24
…
2 years service or more – 1 week for each complete
year of service to a maximum of 12 weeks after 12 years.”
17.
I draw certain conclusions of fact from this contract. First, although
expressed to have a place of work at Heathrow, there was no certainty, under
the contract, that Heathrow would be the only place Mr Williams would be
required to work. Secondly, although Mr Williams was given the job title of
miner, the contract enabled the employer to require Mr Williams to carry out
alternative work under the contract. Thirdly, the contract itself was not for
any fixed period. Fourthly, it was envisaged that the contract could endure
for a period in excess of two years, and possibly for more than 12 years,
subject to the termination provisions.
18.
In a telephone conversation on 16 February 2009 between Mr Williams and
Mr A Rattue of HMRC, Mr Williams agreed that he was at the Terminal 5 site for
more than 24 months. However, he also said at that time that he had been due
to move from Heathrow at approximately 16 months into the contract in order to
work on a different site at King’s Cross in London. However, he had become
aware that the terminal 5 site wanted to maintain its level of workers and he
agreed to stay working there for a further 8 to 10 months, but doing different
work, moving from being a miner to dumper driving and concreting and other
duties.
19.
I did not have the opportunity to ask Mr Williams to explain his
expectations at the time the contract was entered into in September 2002.
Nevertheless, I find that at that time he expected to work at Heathrow for 16
months, and then, under the same contract, to move to the King’s Cross site,
possibly for 8 months. This is consistent with the terms of the contract,
which is open-ended as to duration and flexible as to the type of work and
location. I take into account that Mr Williams maintained the same explanation
throughout his, and his advisers’, correspondence and discussions with HMRC,
although his advisers did at one stage argue that there were two separate
employments.
20.
There is, as HMRC asserted in their correspondence with Mr Williams, and
Mr Jones submitted to me, no documentary evidence to support what Mr Williams
said. Nevertheless, Mr Williams did not seek to disguise the fact that he did
work at Heathrow throughout the period, and in those circumstances I am
prepared to accept that there was a change to his duties after 16 months. That
indicates to me that his job as a tunneller on the Heathrow site had come to an
end, and I can therefore accept that he expected to be moved at that time to
King’s Cross. There is no indication of what Mr Williams expected to happen
after King’s Cross; I infer that this, like the contract itself, was
open-ended.
21.
In making these findings of fact I am conscious, as Mr Jones reminded
me, of the burden of proof that attaches to Mr Williams in relation to the
deductibility issue. I have taken that into account in considering the extent
to which I am able to make findings in the absence of supporting documentary
evidence, or indeed in the absence of Mr Williams himself. It would have been
helpful if Mr Williams had attended and answered questions both from me and Mr
Jones. But taking all matters into consideration, and from the records of
correspondence and notes that I do have, I am satisfied that, on the evidence
before me, and without other documentary evidence in support, I am able to make
the findings of fact that I have.
Deductibility
22.
With these briefly-stated facts in mind I turn to consider whether the
travelling expenses incurred by Mr Williams in travelling from his home and
lodgings to Heathrow are deductible.
23.
In my judgment the material provisions that I must consider are those in
s 338 and, in particular, s 339 of the Income Tax (Earnings and Pensions) Act
2003 (“ITEPA”). Mr Jones referred me to ss 336 and 337 of that Act, but those
clearly would not allow a deduction in these circumstances. In each case there
is a requirement that the expense be incurred in the performance of the duties
of the employment. The travelling expenses with which I am concerned here
clearly relate to travel preparatory to the duties which Mr Williams performed,
and so cannot qualify for relief under either of those heads.
24.
I move on therefore to s 338, the material provisions of which are:
338 Travel for necessary attendance
(1) A deduction from
earnings is allowed for travel expenses if—
(a)
the employee is obliged to incur and pay them as holder of the employment, and
(b)
the expenses are attributable to the employee's necessary attendance at any
place in the performance of the duties of the employment.
(2) Subsection (1) does not
apply to the expenses of ordinary commuting or travel between any two places
that is for practical purposes substantially ordinary commuting.
(3) In this section
“ordinary commuting” means travel between—
(a)
the employee's home and a permanent workplace, or
(b)
a place that is not a workplace and a permanent workplace.
25.
The effect of s 338, therefore, is to provide for a deduction for travel
expenses outside the performance of the employee’s duties, but which the
employee incurs in necessarily attending a place in performance of his duties.
Because this would otherwise allow ordinary commuting to qualify, the law
expressly excludes that, and it does so by defining ordinary commuting by
reference to travel to a permanent workplace.
26.
Section 339 then goes on to explain what is meant by “permanent
workplace” in this context. It provides:
339 Meaning of “workplace” and “permanent
workplace”
(1) In this Part
“workplace”, in relation to an employment, means a place at which the
employee's attendance is necessary in the performance of the duties of the
employment.
(2) In this Part “permanent
workplace”, in relation to an employment, means a place which—
(a)
the employee regularly attends in the performance of the duties of the
employment, and
(b)
is not a temporary workplace.
This is subject to subsections (4) and (8).
(3) In subsection (2) “temporary
workplace”, in relation to an employment, means a place which the employee
attends in the performance of the duties of the employment—
(a)
for the purpose of performing a task of limited duration, or
(b)
for some other temporary purpose.
This is subject to subsections (4) and (5).
(4) A place which the
employee regularly attends in the performance of the duties of the employment
is treated as a permanent workplace and not a temporary workplace if—
(a)
it forms the base from which those duties are performed, or
(b)
the tasks to be carried out in the performance of those duties are allocated
there.
(5) A place is not regarded
as a temporary workplace if the employee's attendance is—
(a)
in the course of a period of continuous work at that place—
(i)
lasting more than 24 months, or
(ii) comprising
all or almost all of the period for which the employee is likely to hold the
employment, or
(b)
at a time when it is reasonable to assume that it will be in the course of such
a period.
(6) For the purposes of
subsection (5), a period is a period of continuous work at a place if over the
period the duties of the employment are performed to a significant extent at
the place.
(7) An actual or
contemplated modification of the place at which duties are performed is to be
disregarded for the purposes of subsections (5) and (6) if it does not, or
would not, have any substantial effect on the employee's journey, or expenses
of travelling, to and from the place where they are performed.
(8) An employee is treated
as having a permanent workplace consisting of an area if—
(a)
the duties of the employment are defined by reference to an area (whether or
not they also require attendance at places outside it),
(b)
in the performance of those duties the employee attends different places within
the area,
(c)
none of the places the employee attends in the performance of those duties is a
permanent workplace, and
(d)
the area would be a permanent workplace if subsections (2), (3), (5), (6) and
(7) referred to the area where they refer to a place.
27.
Mr Jones did not submit that s 338(1) could not apply on its own terms.
His argument was that Heathrow was a permanent workplace, and that accordingly
s 338(1) is in this case disapplied as Mr Williams’ travel amounted to ordinary
commuting.
28.
To be a “permanent workplace” within s 339(2), it would first be
necessary to determine that Heathrow was in these circumstances “a place which
[Mr Williams] regularly attended in the performance of the duties of the
employment”. There is no doubt about Mr Williams’ regular attendance, but a
threshold point is whether Heathrow can be a “place” for this purpose. In my
view, it cannot. Heathrow is a geographical location, in the same way as a
city such as London or a town such as Colwyn Bay would be. That in my view
does not have sufficient particularity to be capable of being regarded as a
place which an employee “attends”. That is more apt to describe a specific
location within a given geographical location or area.
29.
On the other hand, it might in my view be appropriate to describe a
construction site as a place, even if the employee were to work at different
parts of the site from time to time. Such a determination would, however,
depend on the particular facts. It was not in this case argued by HMRC that
the terminal 5 construction site was the relevant place for this purpose;
HMRC’s argument throughout had focussed on the wider area of Heathrow. Absent
further evidence, I am unable to conclude that the terminal 5 site was a place
within the meaning of s 339(2).
30.
That leads me, however, to s 339(8). The duties of Mr Williams were
defined by reference to the area of Heathrow. I can infer that Mr Williams’
duties were performed at different places within Heathrow; if they were
performed at one place only, then that place would be within s 339(2). I also
assume for this purpose that none of the places within Heathrow where Mr
Williams worked was a permanent workplace (if it were then reliance on s 339(8)
would not be needed). On that basis, there would be no need to identify a
specific place within Heathrow; the relevant tests could be applied with
reference to the area of Heathrow instead of to a specific place. Either way
those tests must be applied to ascertain if there is a place or area that is a
permanent workplace for these purposes.
31.
A place or area is excluded from being a permanent workplace if it is a
“temporary workplace” (s 339(2)(b)). “Temporary workplace” is defined by
sub-section (3). There was no dispute that the terminal 5 project was a task
of limited duration. As far as it goes, therefore, Heathrow or the terminal 5
construction site would satisfy the conditions of s 339(3).
32.
But s 339(3) is itself qualified by s 339(4) and (5). Turning first to
s 339(4), this contains a special rule that treats a place as a permanent
workplace if it is a base from which the duties of the employment are performed
or if the relevant tasks are allocated there. Although s 339(2) is qualified
generally by sub-section (4), this particular qualification is relevant only to
the extent that there is an identifiable “place” attended by the employee. For
obvious reasons it cannot apply to an area (see s 339(8)(d)). In my view, this
provision does not apply in this case. There is no evidence of a particular
base from which Mr Williams performed his duties. If terminal 5 was a place
for this purpose, it was the place at which, not from which, the
duties were performed. The purpose of s 339(4) is to ensure that a permanent
base which is used in itself for tasks of limited duration, but from which the
employee is tasked or goes out to work elsewhere, is not thereby pursuant to s
339(3) classified as a temporary workplace. It has no application where the
place in question is the place where the duties of the employment are wholly
performed.
33.
The real issue in this case is the application of s 339(5). That
sub-section qualifies the ordinary meaning given to “temporary workplace” by s
339(3). It requires, first of all, a continuous period of work. That
condition is clearly satisfied in this case. There are then two alternative
conditions. Each depends on the duration of the period of continuous work,
calculated on the one hand by reference to a defined period of 24 months, and
on the other by the likely period of the employment. I have set out s 339
above, but the language of sub-section (5) is important, so I repeat it here:
(5) A place is not regarded
as a temporary workplace if the employee's attendance is—
(a) in the course of a period
of continuous work at that place—
(i) lasting more than 24
months, or
(ii) comprising all or almost all
of the period for which the employee is likely to hold the employment, or
(b) at a time when it is
reasonable to assume that it will be in the course of such a period.
34.
Mr Jones made two submissions in this regard. His first was that
Heathrow was a place (or, as I have indicated, area) attended for a period
exceeding 24 months. Secondly, Heathrow was the place (or area) at which all
the duties of the employment were carried out during the period of Mr Williams’
employment. This, as I put to Mr Jones at the hearing, applies a hindsight
test. Essentially, as things turned out, Mr Williams worked at Heathrow for
more than 24 months, and he also worked there throughout the period of his
employment. He is not, according to this analysis, entitled to a deduction for
any of his travel expenses.
35.
In the course of the hearing I referred Mr Jones to the booklet,
published by HMRC, E490 entitled Employee Travel: A tax and NICs guide for
employers, which had been included in the hearing bundle. My reason for
doing so was to give Mr Jones the opportunity to explain the apparent
discrepancy between his submissions in this respect and certain of the examples
in the guide. I set out two particular examples below:
[paras 3.12 – 14; page 13]
Example
Earl has worked for his employer for 3 years. He is
sent to perform full-time duties at a workplace for 18 months. After 10 months
the posting is extended to 28 months. Relief is available for the full cost of
travel to and from the workplace during the first 10 months (while his
attendance is expected to be for less than 24 months) but not after that (once
his attendance is expected to exceed 24 months).
[para 3.16; page 15]
Example
Erica is employed as a computer consultant. She
works full-time at a site for 18 months developing a new computer system. The
work is then extended for another 18 months at the same workplace, for the
roll-out of the new computer system. The roll-out is subject to a separate
contract between the employer and client.
As long as Erica did not expect to be working on the
site for more than 24 months she is entitled to relief for the cost of
travelling from home to the site. Once her employer enters into a new contract
Erica expects to be working on the site for more than 24 months so from that
point she is not entitled to relief for her journey from home to the site.
36.
Mr Jones accepted that if hindsight was applied in applying the tests in
s 339(5), the examples quoted would be concessionary. Those examples permit
relief based on expectation, and only deny relief for a period after that
expectation has changed. The relief available on the basis of the earlier
expectation is not later denied by reference to the fact that either the period
of continuous work has in the event lasted more than 24 months, or that in the
event it has comprised all or almost all of the employment period.
37.
In my judgment the examples in the guide reflect, at least in this
respect, a proper interpretation of the law. Section 339(5) is expressed in
the present tense. It is looking at the position at all relevant times
throughout the relevant period. The question is whether at the time the
expenses are incurred the period of continuous work is at that time one that is
lasting more than 24 months or it is reasonable to assume that it will, or
alternatively that the period of continuous work comprises all or almost all of
the period for which the employee is likely to hold the employment or it is
reasonable to assume that it will. The use of “lasting” rather than “has
lasted”, and “is likely to hold” instead of “has held” are clear indications
that the legislature intended these tests to be applied from time to time, by
reference to the position obtaining at the relevant times.
38.
As I remarked to Mr Jones in the course of argument, such an
interpretation seems to me to accord with the nature of income tax as an annual
tax. It would be, in my view, a strange result if an employee such as Earl or
Erica, in making a claim for travel expenses, would as a matter of law (if not
practice) have to “wait and see” if a temporary assignment that was expected to
be for less than 24 months might for some reason be extended beyond that time.
It would also be an unsatisfactory result if a claim that was initially valid
on the basis of expectation, could retrospectively be disallowed if the reality
turned out to be different from the expectation. I do not believe that
Parliament could have intended such a result.
39.
In the course of his submissions Mr Jones referred me to two
authorities, Ricketts v Colquhoun [1926] AC 1; 10 TC 118 and Kirkwood v Evans [2002] STC 231. I have not derived any assistance from
these. Rickets v Colquhoun was a case on rules for deductibility which
now find their expression in ss 336 and 337 ITEPA; it has no application to the
detailed provisions in ss 338 and 339. By contrast, Kirkwood v Evans
did consider the provisions regarding ordinary commuting that were contained in
Sch 12A to the Income and Corporation Taxes Act 1988. But in that case the
taxpayer conceded that the office to which he travelled on one day per week was
a permanent workplace. There is nothing in Kirkwood v Evans that
can assist HMRC in that respect.
40.
On the basis of my interpretation of the legislative provisions I turn
to applying the law to the facts as I have been able to find them. I have
accepted that Mr Williams had an expectation that after 16 months he would be
moved to the King’s Cross site under the same employment contract, which was
open ended as to its duration. At the outset of his employment with Morgan
Est, therefore, his attendance at Heathrow was for the purpose of performing a
task of limited duration for which Mr Williams period of continuous work was
not at that time either lasting more than 24 months, nor comprising all or
almost all of the period for which Mr Williams was likely to hold the
employment. Nor was it reasonable to assume that Mr Williams’ attendance at
Heathrow would be in the course of such a period.
41.
In so concluding I have taken account of s 339(6), which provides that a
period is a period of continuous work at a place (or area) if over the period
the duties of the employment are performed to a significant extent at that
place (or area). In the guide, HMRC say that they regard a significant extent
as meaning 40% or more of working time. This would mean, for example, based on
the guide, that if Mr Williams had expected to be at King’s Cross for, say, 9
months, and the contract had then been expected to come to an end, his work at
Heathrow could then have been regarded as for the whole 25-month period (as it
would be 64% of the working time in that period), and indeed for the whole
period of the employment.
42.
I heard no argument on the 40% figure, or on the way HMRC apply it
according to their guide, and I need not reach any conclusion on those matters.
On the facts I have found in this case, there was no finite end to Mr Williams’
contract expected at any time material to this appeal. There was no
expectation as to what would happen when Mr Williams’ work on the King’s Cross
project came to an end. He might have returned to Heathrow, as the place
mentioned in the contract, or he might not, as was permitted by the contract. The
contract was open-ended, and contemplated a term considerably in excess of 2
years. In fact, it lasted for 33 months, and was only terminated by reason of
redundancy. Both at the outset, therefore, and at all times up to the change
of plan at the end of 16 months, Mr Williams could not have had expectations of
what would happen in the future that would have enabled the conclusion to be
drawn that, taking account of s 339(6) or the way in which HMRC apply that
provision, his work overall at Heathrow would be treated as a continuous period
of work lasting more than 24 months, or the whole of his employment. It was
not, in my judgment therefore, at any material time reasonable to assume that
Mr Williams’ attendance at Heathrow would be in the course of a period of
continuous work there lasting more than 24 months, or for all or almost all the
period of his employment.
43.
On the basis of my conclusions, the result is that for the period of 16
months from the commencement of Mr Williams’ employment, so up to January 2004,
Heathrow was not a permanent workplace, and Mr Williams is accordingly entitled
to deductions for his travelling expenses in that period. Thereafter, as he
expected from that time that his period of continuous work at Heathrow would
last more than 24 months, Heathrow became a permanent workplace, and he is not
entitled to deductions for that latter period.
44.
It follows that the assessment for 2002-2003 is discharged and the adjustment
for 2004-2005 is upheld. For 2003-2004, deductions are available for travel
expenses incurred between 6 April 2003 and January 2004, and the assessment is
discharged to that extent, but I cannot make a final determination as I do not
have a detailed breakdown of the dates on which the expenses were incurred. To
that extent, therefore, this decision is in principle only. I hope that the
parties will be able to agree the figures for 2003-2004, but if not there is
liberty to apply for my further determination. Except to that extent, and
subject to what I say about discovery, the 2003-2004 assessment is upheld.
Discovery
45.
In light of my decision on the deductibility issue, it is necessary for
me to consider the issue of whether the discovery assessment is valid only in
relation to the assessment in respect of 2003-2004, part of which I have upheld.
However, I also consider the position in case I am found to be wrong to have
discharged the assessment for 2002-2003 and part of the assessment for 2003-2004.
46.
The material parts of s 29 of the Taxes Management Act 1970 are as
follows:
29 Assessment where loss of tax discovered
(1) If an officer of the Board or the Board
discover, as regards any person (the taxpayer) and a year of assessment—
(a) that any income
which ought to have been assessed to income tax, or chargeable gains which
ought to have been assessed to capital gains tax, have not been assessed, or
(b) that an assessment
to tax is or has become insufficient, or
(c) that any relief
which has been given is or has become excessive,
the officer or, as the case may be, the Board may,
subject to subsections (2) and (3) below, make an assessment in the amount, or
the further amount, which ought in his or their opinion to be charged in order
to make good to the Crown the loss of tax.
(2) Where—
(a) the taxpayer has
made and delivered a return under section 8 or 8A of this Act in respect of the
relevant year of assessment, and
(b) the situation
mentioned in subsection (1) above is attributable to an error or mistake in the
return as to the basis on which his liability ought to have been computed,
the taxpayer shall not be assessed under that
subsection in respect of the year of assessment there mentioned if the return
was in fact made on the basis or in accordance with the practice generally
prevailing at the time when it was made.
(3) Where the taxpayer has made and delivered a
return under section 8 or 8A of this Act in respect of the relevant year of
assessment, he shall not be assessed under subsection (1) above—
(a) in respect of the year
of assessment mentioned in that subsection; and
(b) in the same
capacity as that in which he made and delivered the return,
unless one of the two conditions mentioned below is
fulfilled.
(4) The first condition is that the situation
mentioned in subsection (1) above was brought about carelessly or deliberately
by the taxpayer or a person acting on his behalf.
(5) The second condition is that at the time when an
officer of the Board—
(a) ceased to be
entitled to give notice of his intention to enquire into the taxpayer's return
under section 8 or 8A of this Act in respect of the relevant year of assessment;
or
(b) informed the
taxpayer that he had completed his enquiries into that return,
the officer could not have been reasonably expected,
on the basis of the information made available to him before that time, to be
aware of the situation mentioned in subsection (1) above.
(6) For the purposes of subsection (5) above,
information is made available to an officer of the Board if—
(a) it is contained in
the taxpayer's return under section 8 or 8A of this Act in respect of the
relevant year of assessment (the return), or in any accounts, statements or
documents accompanying the return;
(b) it is contained in
any claim made as regards the relevant year of assessment by the taxpayer
acting in the same capacity as that in which he made the return, or in any
accounts, statements or documents accompanying any such claim;
(c) it is contained in
any documents, accounts or particulars which, for the purposes of any enquiries
into the return or any such claim by an officer of the Board, are produced or
furnished by the taxpayer to the officer ; or
(d) it is information
the existence of which, and the relevance of which as regards the situation
mentioned in subsection (1) above—
(i) could reasonably be
expected to be inferred by an officer of the Board from information falling
within paragraphs (a) to (c) above; or
(ii) are notified in
writing by the taxpayer to an officer of the Board.
(7) In subsection (6) above—
(a) any reference to the
taxpayer's return under section 8 or 8A of this Act in respect of the relevant
year of assessment includes—
(i) a reference to any
return of his under that section for either of the two immediately preceding
chargeable periods; and
(ii) where the return is
under section 8 and the taxpayer carries on a trade, profession or business in
partnership, a reference to any partnership return with respect to the partnership
for the relevant year of assessment or either of those periods; and
(b) any reference in
paragraphs (b) to (d) to the taxpayer includes a reference to a person acting
on his behalf.
...
(8) An objection to the making of an assessment
under this section on the ground that neither of the two conditions mentioned
above is fulfilled shall not be made otherwise than on an appeal against the
assessment.
...
47.
This version of s 29 reflects the amendment to s 29(4) that was made by
the Finance Act 2008 with effect from 1 April 2010, or in certain transitional
cases from 1 April 2012. The former version referred to the situation being
“attributable to fraudulent or negligent conduct” on the part of the taxpayer
or a person acting on his behalf, rather than to “carelessly or deliberately”.
Mr Jones proceeded on the basis that the former wording was applicable to this
appeal, as it applied at the time of the assessments in question. I consider
that it is the amended wording that is applicable. The amendment was not
qualified by reference to years of assessment or the making of the assessment
itself, but simply by reference to a commencement date. The question to be
answered under s 29(4) is not one that has to be considered at the time the
discovery is made or the assessment is made (see Hankinson v Revenue and
Customs Commissioners [2012] STC 485; the tests in s 29(4) and (5) are
objective, and are to be tested on appeal in accordance with s 29(8)).
48.
Having said that, I turn first to s 29(5). It seems to me appropriate
to do so, as it is only if that condition is not satisfied that I need to
consider s 29(4). That was the approach adopted in Hankinson, and I believe
that it is the proper one to adopt.
49.
At the times when HMRC ceased to be entitled to open an enquiry into Mr
Williams’ tax affairs for 2002-2003 and 2003-2004, and indeed up to the making
of the discovery assessments, the only information HMRC had, for the tax years
in question, were the entries made in Mr Williams’ self-assessment returns for
“travel and subsistence”. This information comprised only figures. In those
circumstances, I agree with Mr Jones that the officer could not reasonably have
been expected to have been aware of the fact that, to the extent that it had,
excessive relief had been claimed.
50.
It follows therefore that the discovery assessment for the relevant part
of 2003-2004, and, to the extent it may become relevant, the assessments for
2002-2003 and for the remainder of 2003-2004, were validly made.
51.
On this basis, it is not strictly necessary for me to address s 29(4).
However, I should say that I do not consider that condition to have been
satisfied. There is no allegation that Mr Williams acted fraudulently or
deliberately. The case is put by reference to Mr Williams’ negligence or, as I
have concluded, carelessness. Mr Jones pointed me to the guidance notes for
2003-2004 tax returns (those for 2002-2003 could not be located) and what was
said there under the heading Business Journeys. He submitted that Mr
Williams’ claims were not insignificant and that a reasonable man giving his
affairs due diligence would read the guidance notes, and where necessary
contact HMRC for further guidance. HMRC had no record of Mr Williams having
raised any query in this respect before he completed the relevant returns.
52.
Mr Jones also referred me to the guidance in booklet E490 (Employee
Travel) to which I have referred earlier, along with print outs from HMRC’s
Employment Income Manual, accessible on the internet.
53.
I do not believe that the reasonable and diligent taxpayer, in the
circumstances of Mr Williams, could be criticised at all if he failed to
negotiate a successful path through the labyrinth of the law and practice on
ordinary commuting and permanent and temporary workplaces. As my own
conclusions demonstrate, it appears to me that even HMRC have difficulty in
marrying up their view of the law with their published practice in this area.
In a straightforward case the answer may be clear, and a taxpayer who fails to
reach the right conclusion in such a case might well, depending on the facts,
be found to have acted carelessly. But this is, in my view, far from a
straightforward case, and I do not consider that the mistake made by Mr
Williams in claiming deductions to which he was not entitled can in these
circumstances be described as careless.
54.
There is one further aspect of s 29 I should consider. It is relevant
only to the extent that I might be found to be wrong in allowing deductions for
the period up to Mr Williams coming to expect that his period of continuous
work at Heathrow was likely to exceed 24 months. In that circumstance I
consider that s 29(2) can apply. Under that sub-section, a taxpayer who has
made a return (as Mr Williams did) cannot be assessed under s 29(1) if the
claim to excessive relief is attributable to an error or mistake in the return
as to the basis on which his liability ought to have been computed, and the
return was in fact made on the basis or in accordance with the practice
generally prevailing at the time when it was made.
55.
The only evidence of HMRC’s practice in this area was that provided to
me in the bundle, in particular the booklet E490, and the examples from that I
have described above. On the basis of those examples, my view would be that to
the extent of the relief there described, and assuming that this guidance was
in force at the relevant times, Mr Williams’ tax returns could have been in
accordance with that practice. Mr Jones argued that s 29(2) could only apply
at all if Mr Williams had been aware of any relevant practice. I do not agree.
Section 29(2) makes no reference to the knowledge of the taxpayer; it merely
requires the return, objectively, to be in accordance with the relevant
practice. It would, as I suggested to Mr Jones, be surprising if the law
sought to protect only the well-informed taxpayer, and not an ill-informed one
who made his return on an identical basis.
56.
As the booklet E490 referred to ITEPA, it is not clear if, and to what
extent, it will have applied at the times Mr Williams was completing and filing
his tax returns. It may well have done, as ITEPA was a consolidating Act and the
relevant law applied before that time, but the information I have does not
enable me to say. Accordingly, I reach no conclusion on this point. It will
be an issue only to the extent that it might be decided, contrary to my own
decision, that Mr Williams is not entitled to the deductions. Further evidence
may be required in those circumstances.
Decision
57.
For the reasons I have given, I allow this appeal in part.
58.
I discharge the 2002-2003 assessment.
59.
I discharge the 2003-2004 assessment to the extent that it relates to
travel and subsistence expenses incurred from 6 April 2003 to January 2004.
60.
Otherwise I confirm the assessment for 2003-2004.
61.
I confirm the adjustment for 2004-2005.
62.
If the parties are unable to agree the figures for 2003-2004, either
party may apply for a further determination by me in that respect.
Application for permission to appeal
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.
ROGER BERNER
TRIBUNAL JUDGE
RELEASE DATE: 31 May 2012
