[2013] UKFTT 133 (TC)
TC02562
Appeal number: TC/2012/03432
INCOME TAX – schedule 36 para 39 & 40 finance act
2008 – whether penalties for non compliance with information notice should be
upheld – appeal dismissed
FIRST-TIER TRIBUNAL
TAX CHAMBER
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WAI YAN CHAN
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Appellant
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- and -
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THE
COMMISSIONERS FOR HER MAJESTY’S
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Respondents
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REVENUE &
CUSTOMS
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TRIBUNAL:
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JUDGE IAN HUDDLESTON
MRS PATRICIA GORDON
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Sitting in public in Belfast on 4 December 2012.
Mr. P. Donnelly for HMRC
Mr. Michael Feng, Feng &
Co., for the Appellant
© CROWN COPYRIGHT
2013
DECISION
Appeal
1. This is an
appeal by Wai Yan Chang (“the Appellant”) against penalties which have been
levied by HMRC under paragraphs 39 and 40 of Schedule 36 of the Finance Act
2008.
2. The
penalties levied consisted originally of a £300 fixed penalty (paragraph 39),
and a sum of £3,060 calculated as a daily penalty of £30 per day for the period
from the 2 September 2011 to the 12 December 2011 (102 days).
3. The Appellant’s
representatives requested a statutory review of the penalty, the determination of
which was originally issued on the 12 December 2011.
4. Upon
review the penalties were upheld and notification of that decision was released
to the Appellant and his agents by letter dated the 1 February 2012. It is
against that decision that the Appellant now appeals.
Legislation
5. The
penalties in reference were imposed under paragraphs 39 and 40 of Schedule 36
of the Finance Act 2008 which provides as follows:
Paragraph 39(1)
“This paragraph applies to
a person who –
(a) fails to comply with an
Information Notice
(b) ……
(2) The person is liability
to a penalty of £300.
(3) The reference in this
paragraph to a person who fails to comply with an Information Notice includes a
person who conceals, destroys, or otherwise disposes of or arranges for the
concealment, destruction or disposal of, a document in breach of paragraph 42
or 43.”
Paragraph 40(1)
“(1) This paragraph applies
if the failure or obstruction mentioned in paragraph 39(1) continues after the
date on which a penalty is imposed under that paragraph in respect of the
failure or obstruction.
(2) The person is liable to
a further penalty or penalties not exceeding £60 for each subsequent day on
which the failure or obstruction continues.”
Facts
6. An Information
Notice was issued by Mr. Boles (the investigating officer) on the 13 August
2010 in accordance with the provisions of paragraph 1, Schedule 36, Finance Act
2008 covering, in total, seven items on which further information was sought.
7. The
requirement for further information had arisen out of Mr. Bole’s review of the
Appellant’s 2008 tax return and the opening of an enquiry under Section 9A of
the Taxes Management Act 1970.
8. Prior to
the issue of the Information Notice, the Appellant’s representatives had
written seeking a Closure Notice. Arising from that exchange, the Appellant
sought an independent review of the decision to issue the Information Notice.
That review upheld the original Schedule 36 Notice. The decision not to issue
a Closure Notice was then appealed to this Tribunal (TC/2010/03792).
9. The
Tribunal determined that it was inappropriate to direct the issue of a closure
notice given the currency of the outstanding investigation and information
sought on foot of the Information Notice.
10. Subsequent to that decision,
HMRC wrote to the Appellant’s agents repeating their request for outstanding
information, specifically in relation to a number of bank accounts, redacted
bank statements provided in relation to those bank accounts, and certain
details regarding the acquisition of some residential investment properties.
11. The next stage was that the
Appellant appealed against the confirmation (on review) of the Schedule 36
Notice.
12. That case was heard by the
Tribunal on the 15 June 2011 where the appeal against the Schedule 36 Notice
was dismissed.
13. Subsequent to those
proceedings, Mr. Chan made a witness statement detailing the extent of his
belief that he had complied with the Schedule 36 Notice.
14. HMRC did not agree with his
interpretation, however, and accordingly levied a £300 penalty on the 1
September 2011 under paragraphs 39 and 46 of Schedule 36 Finance Act 2008.
15. The Appellant’s
representatives appealed that penalty and requested an independent review.
16. Mr. C. Agg (Appeals and
Review Unit, York) issued the conclusions of his independent review on the 26
October 2011. As part of that review, Mr. Agg accepted that item 1 (Business
Bank Accounts), items 2, 3 and 4 (in relation to the working papers of the
Appellant’s former accountants) and item 5 (Accommodation for Employees) as
detailed on the Schedule 36 Notice could be regarded as satisfied, but that the
information requirement in relation to item 6 (Personal Bank Accounts) and item
7 (the Financing of Property Acquisitions) had not been satisfied, and
therefore determined that the penalty should be upheld.
17. On the 2 December 2011 HMRC
wrote to Mr. Chan warning of the intention to charge daily penalties and,
subsequent to that warning, HMRC did charge daily penalties in the sum of
£3,060 (£30 per day for 102 days from the 2 September 2011 to the 12 December
2011).
18. The Appellant’s
representatives requested an independent review which was undertaken by Mrs. J.
Laube, Appeals and Review Unit, York, and was issued on the 1 February 2012.
19. In relation to item 6 (the
Bank Accounts) Mrs. Laube accepted that information concerning five bank
accounts had been satisfied, but that information concerning three bank
accounts was outstanding.
20. As regards item 7 (Financing
of Properties) Mrs. Laube determined that the request for information had not
been satisfied. Accordingly, she concluded that “the penalties should be
upheld”.
21. The Appellant appealed to
this Tribunal.
22. On the 24 April 2012 HMRC
advised Mr. Chan that they intended to issue third party notices to the three
banks concerned.
23. On the 10 May 2012 the
Appellant’s agents produced photocopies of statements from three banks. The
statements showed a number of lodgements totalling £6,000 in cash during the
period of the enquiry, but did not give any explanation as to the source of
this cash. The bank statements failed to show repayments on the mortgages for
the three properties concerned, and equally failed to show the deposit which
hadbeen paid in relation to the purchase of one of them (218 College Heights).
24. The account also failed to disclose
information regarding a family trip to China in July 2007 – again within the
enquiry period.
25. Mr. Boles, who gave evidence
to the Tribunal, confirmed that no further information regarding either item 6
(the Bank Statements) or item 7 (the Financing of the Properties) had been
furnished.
HMRC’s Case
26. Based on the history of this
case, HMRC advanced the argument that the Appellant has not fully complied with
the Information Notice by the date upon which the penalty determination was
issued.
27. For that reason, HMRC
contend that the penalty determination of £300 and £3,060 should be upheld.
The Appellant’s Case
28. The Appellant was
represented by Mr. Feng.
29. The Appeal Notice before the
Tribunal disclosed three grounds of appeal:
(1) that the initial penalty of
£300 had been issued without HMRC following internal guidelines. As this
argument was not further advanced at the Tribunal and the appeal in relation to
it was, in essence, withdrawn, I make no further comment in relation to it;
(2) that the level of daily fine
was too high in light of HMRC’s reviews. In relation to this ground, the
Appellant considers that £30 per day as against a total of £60 per day is
excessive;
(3) finally, the Appellant
advanced the argument that Mr. Boles is on a fishing expedition.
30. It is these three points
that were advanced at the Appeal hearing.
Decision
31. The issue for this Tribunal
is firstly whether or not the Information Notice had been fully complied with
prior to the issue of the daily penalties notice. In that specific regard, we
heard oral evidence from both Mr. Boles on behalf of HMRC and submissions from
the Appellant’s representative, Mr. Feng.
32. Mr. Feng’s argument is that
the requirement for “full” compliance with the Information Notice is not
strictly part of the legislation, and he therefore advanced the view that the
provision of redacted bank account statements (which provided information on
interest accrued, but did not disclose any other entries) was sufficient
compliance in relation to the information sought regarding the Appellant’s personal
bank statements (item 6), and that the requirements of the Information Notice
was therefore satisfied.
33. As regards item 7 (the
Financing of Properties) he relied essentially on Mr. Chan’s witness statement
of 2 August 2012 in which Mr. Chan advanced the argument that he had sufficiently
complied with the request for information regarding the purchase of the
properties because he had written to his then instructed solicitor – even
though no information was actually provided.
34. As regards the details
sought regarding the specific purchase of College Heights, Mr. Chan, in that
witness statement, indicated that they were “not in [my] possession because
I have misplaced them”.
35. This is the stance which Mr.
Feng adopted at the Tribunal.
36. Faced with that argument,
the Tribunal can do no more than confirm that it agrees with the conclusions of
Mrs. Laub who undertook the independent review.
37. As regards the question of
the redacted bank statements, the Information Notice sought “statements /
books for all other bank / building society accounts for which interest was
received during the period from the 6 April 2007 to the 5 April 2008 for Mr. W.
Y. Chan, including joint accounts.”
38. In relation to the specific
point, the Tribunal concludes that the provision of redacted bank statements
showing only the interest accruing is not due compliance with the original
request. The Tribunal does not accept Mr. Feng’s view that the redacted
statements were sufficient.
39. As regards the properties,
the Information Notice sought the following details:
(1) all documents that show
detail of mortgage repayments to 20 Old Forge and 18 Linen Green during the
period from the 1 February 2007 to the 5 April 2008;
(2) all documents that show details
of the purchase of College Heights, including but not limited to those
documents showing for the period from 1 February 2007 to 5 April 2008:
(a)
the purchase price;
(b)
deposit paid;
(c)
mortgage arrangements;
(d)
amounts of legal fees and disbursements paid; and
(e)
cost of furnishings bought.
40. In response to this request,
no information has been supplied. The Appellant has advanced an argument that
this information was not in his control. We do not accept that as a
proposition. To suggest that merely writing to the instructed solicitor is
sufficient is not in our view enough. We conclude that the Appellant has not
complied with the requirement of the Information Notice.
41. In those circumstances the
Tribunal finds that there was not due compliance with the Information Notice at
the time when the notice of the daily penalties was sent to the Appellant.
42. As for the quantum of the
penalties, HMRC are at liberty charge a penalty up to a maximum of £60 per day
pursuant to the provisions of paragraph 40, where there is continuing “failure
or obstruction”.
43. This Tribunal finds that at
the date upon which the penalty notice was issued there continued to be such “failure
or obstruction” and, having heard the parties and reviewed the facts which
pertained to this case, consider that Mr. Boles, in raising a penalty of £30
per day, was acting reasonably and had not taken into account something he
ought not.
44. It follows from those two
findings that the Appeal is dismissed.
45. No order as to costs.
46. If you are dissatisfied with
the outcome of the application for permission to appeal the decision in this
appeal, either party has the right to apply to the Upper Tribunal for
permission to appeal. Such an application must be made in writing to the Upper
Tribunal at 45 Bedford Square, London, WC1B 3DN no later than one month after
the date of this notice. Such an application must include the information as
explained in the enclosed guidance booklet “Appealing to the Upper Tribunal
(Tax and Chancery Chamber).
IAN HUDDLESTON
TRIBUNAL JUDGE
RELEASE DATE:
19 February 2013
