DECISION
Introduction
1.
HM Revenue & Customs (“HMRC”) opened enquiries into Mr Mathew’s
self-assessment (“SA”) returns for the five years 2008-09 through to 2012-13
(“the relevant years”). They also issued two Notices under Finance Act 2008,
Schedule 36 (“Sch 36”).
2.
Mr Mathew applied to the Tribunal, asking it to issue a direction that
HMRC close all enquiries forthwith. He also notified appeals to the Tribunal
against the Sch 36 Notices.
3.
The issues in the case were:
(1)
whether the case should be stayed pending the preliminary hearing which
is to be listed for Gold Nuts Limited and others v HMRC; and if not
(2)
whether Mr Mathew had appealed the Sch 36 Notices to HMRC as required by
Sch 36, para 32;
(3)
if so, whether the Tribunal should confirm, vary or set aside the Sch 36
Notices; and
(4)
whether the Tribunal should issue a direction that HMRC close one or
more of the SA enquiries.
4.
Although Mr Mathew had been issued with a £300 penalty for
non-compliance with one of the Sch 36 Notices, Mr Onalaja confirmed that this
had not been appealed and was not before the Tribunal.
Summary of decision
5.
The Tribunal decided that the case should not be stayed, for the reasons
given at §35ff.
6.
As explained at §43ff, the Sch 36 Notices had not been appealed to HMRC;
however, HMRC exercised their discretion to accept a late appeal and the
Tribunal dispensed with the strict notification requirements.
7.
The Tribunal decided to vary the Sch 36 Notices and for ease of
reference have set out the Notices (as varied) at Appendix 1. We direct that
Mr Mathew comply with Notices, as varied, by 30 days from the date of issue of
this decision.
8.
We also decided that there were reasonable grounds for not directing
HMRC to close the SA enquiries within a specified period. .
The legislation and the
evidence
9.
The relevant legislation is set out as Appendix 2 to this decision.
10.
The Tribunal was provided with a Bundle of documents prepared by HMRC,
which included:
(1)
the correspondence between the parties, including various documents
provided by Mr Mathew in response to the first Sch 36 Notice;
(2)
the correspondence between the parties and the Tribunal;
(3)
the SA return summaries for Mr Mathew, showing the dates on which his
returns were filed for the relevant years; and
(4)
tax calculations for each of the relevant years, prepared by HMRC.
11.
Mr Kevin Straughair was the officer in HMRC’s Specialist Investigations
Unit who opened the enquiries into Mr Mathew’s SA returns for the relevant
years, and he also issued the Sch 36 Notices. Mr Straughair gave oral
evidence-in-chief, led by Ms Jones, and was cross-examined by Mr Onalaja. We found
him to be an honest and straightforward witness.
12.
Mr Mathew provided a witness statement and attended the hearing.
However, he declined to give evidence. As this case was classified as “Basic”
under Rule 23 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber)
Rules 2009 (“the Tribunal Rules”) the Tribunal had not issued the direction
often given in “Standard” cases that a party seeking to rely on a witness
statement “must call that witness to be available for
cross-examination by the other party (unless notified in advance by the other
party that the evidence of the witness is not in dispute).”
13.
Mr Onalaja said he was aware that Mr Mathew’s decision not to take the
stand (a) prevented any contentious points included his witness statement from
being tested in cross-examination and (b) might mean that the weight which the
Tribunal placed on his evidence would be reduced. Mr Onalaja said that as Mr
Mathew’s witness statement was largely a recitation of the parties’
correspondence, it contained few contentious points. Mrs
Naylor did not ask that the Tribunal direct, under Rule 15(1)(e) of the
Tribunal Rules, that Mr Mathew give his evidence orally, so as to allow HMRC
the opportunity for cross-examination.
14.
On the basis of the evidence in the Bundle, Mr Straughair’s oral
evidence, and Mr Mathew’s witness statement, we make the following findings of
fact, which were not in dispute.
Findings of fact
15. Mr Mathew is a director of
Gold Nuts Limited (“Gold Nuts”), a company with a number of subsidiaries,
including Blackbay Ventures Limited (“BBL”). Mr Mathew is also a director of
Noviscom Limited (“Noviscom”), which is not a subsidiary of Gold Nuts.
However, Gold Nuts and Noviscom have some directors and/or shareholders in
common.
16.
On 31 May 2012, HMRC served Mr Mathew with a Notice to file his 2008-09
SA return. The Notices to file the SA returns for the other relevant years
were all issued on 4 June 2013.
17.
Table 1 below shows when Mr Mathew filed his returns for the relevant
years, and when HMRC opened enquiries under Taxes Management Act 1970 (“TMA”),
s 9A. It also sets out Mr Mathew’s total income as shown on his SA returns,
before and after deduction of the personal allowance (“PA”) for each year, and
the tax calculated as due based on the figures on his SA returns.
|
TABLE 1
|
|
Tax Year
|
Total income before
PA
|
Total income after
PA
|
Tax
|
Date of Notice
|
Date Filed
|
Date enquiry opened
|
|
2008-09
|
£129,524
|
£123,489
|
£42,709
|
31/5/12
|
30/3/13
|
18/3/14
|
|
2009-10
|
£45,217
|
£38,742
|
£8,160
|
4/6/13
|
7/1/14
|
18/3/14
|
|
2010-11
|
£46,030
|
£39,555
|
£8,342
|
4/6/13
|
7/1/14
|
18/3/14
|
|
2011-12
|
£13,626
|
£6,151
|
£1,230
|
4/6/13
|
7/1/14
|
13/3/14
|
|
2012-13
|
£8,105
|
£466
|
£93
|
4/6/13
|
26/1/14
|
18/3/14
|
18.
All the enquiries were opened within the statutory time limits.
19.
As can be seen from Table 1, on 13 March 2014 HMRC opened the enquiry
into Mr Mathew’s 2011-12 SA return. That return disclosed total income of
£13,626, made up of £12,624 of employment income and £1,002 of profits from UK land and property. Mr Straughair’s opening letter asked about Mr Mathew’s property
business income, his employments, and other matters. The detail of that letter
is replicated in the first Sch 36 Notice (“the First Notice”), and so is dealt
with at §101 below. The letter asked Mr Mathew to respond by 12 April 2014.
20.
The enquiries into the other relevant years were all opened on 18 March
2014. Mr Straughair said in his covering letter that “at the moment I do not
require any information about these particular years. I am protecting HMRC’s
position to make enquiries should the need arise.”
21.
On 14 April 2014, having received no response to his letter of 13 March
2014, Mr Straughair issued the First Notice. It asked for the information and
documents summarised in Table 2 below. The parties agree that some of these Items
had been supplied in the course of correspondence between April and June 2014,
and this is shown as “agreed” in the third column of Table 2. Where the
parties agree that some of the documents/information have been provided, this
is shown as “in part.”
22.
Where the parties do not agree as to whether or not the Notice has been
complied with, this is shown as “No” in the third column of Table 2. In other
words, at this stage we are only recording the parties’ agreement or otherwise
as to the extent of Mr Mathew’s compliance with the Notice; we are not making a
decision as to the extent to which the documents/information have been
provided. We come to this later in our decision.
|
TABLE 2
|
|
No.
|
Item
|
Agreed provided?
|
|
1
|
Addresses of rental properties and certain details
|
Yes
|
|
2
|
Schedule of [rental] income and expenditure
|
Yes
|
|
3
|
Schedule of any shares held in any entities, including
as a nominee or in another name, showing name and address of entity, date and
cost of acquisition, date and value of sale. This list should include
interests in partnerships and joint ventures
|
In part
|
|
4
|
Schedule of any benefits or loans received because of
Mr Mathew’s position in an entity, such as a director, shareholder, partner,
employee or nominee
|
No
|
|
5
|
For each director’s loan account, a chronological
breakdown with narrative description for amounts received
|
In part
|
|
|
Details and evidence to support any repayments made on
these loans, including bank statements showing the payments made
|
In part
|
|
6
|
All bank and/or building society books or statements,
cheque book stubs, and deposit book counterfoils (“bank statements etc”) from
any account into which Mr Mathew received his employment income and into
which he received income from or made payments to a director’s loan account
|
In part
|
|
7
|
For any personal assets on which there is a charge
such as a mortgage or loan, the loan agreements and/or mortgage statements
which cover the whole period, and the bank and/or building society books or
statements from which these payments were made for the period
|
In part
|
|
8
|
Bank statements etc for any account into which any
income from, or expenditure of, the property business is paid
|
Yes
|
|
9-10
|
Rent books and tenancy agreements
|
Yes
|
|
11
|
Housing benefit slips
|
Yes
|
|
12
|
Expense invoices [related to the property business]
|
Yes
|
23.
Included in Mr Straughair’s covering letter attached to the First Notice
are clear instructions on how to appeal against the Notice including
information on the time limit.
24.
On 11 July 2014, as part of his SA enquiries into Mr Mathew’s 2011-12
and 2012-13 returns, Mr Straughair asked for further information. On 13 August
2014, having not received a response to that letter, Mr Straughair issued
another Sch 36 Notice (“the Second Notice”) with two Schedules, one for each
year, as summarised at Table 3.
25.
There was no agreement as to the extent to which this Notice had been
complied with, and we return to this at §151 below. As with the First Notice,
the covering letter gave clear instructions on how to appeal and the time
limits.
|
TABLE 3
|
|
2011-12
|
|
No.
|
Item
|
|
1
|
Employment/director contracts between Mr Mathew and
any/all of seven named companies
|
|
2
|
Loan agreements between Mr Mathew and (a) BBL and (b)
Noviscom
|
|
3
|
Supporting documents for the credit balance with BBL
|
|
4
|
Specified information about the disposal of a property
at Stanmore Hill, Middlesex
|
|
5
|
All bank accounts etc held in own name or jointly
|
|
6
|
A schedule of any rental income from the property at
Stanmore Hill, including the name and address of any tenant
|
|
7
|
State whether the Stanmore Hill property was disposed
of to a connected party
|
|
8
|
Explanation of some thirty deposits in Mr Mathew’s
bank account, which had been extracted from the bank statements provided in
response to the First Notice.
|
|
9
|
Explanation of the opening credit balance which Mr
Mathew said was owed by BBL to him of £31, 458.
|
|
2012-13
|
|
1
|
Any employment/director
contracts between Mr Mathew and 13 named companies
|
|
2
|
All bank accounts etc
held in own name or jointly
|
|
3
|
For each loan account held with a company, a detailed
and chronological breakdown with narrative description for amounts received,
opening and closing balances, and movements during the period including any
repayments, evidenced by bank statements
|
26.
Meanwhile, on 11 August 2014, Mr Mathew had made a complaint about the
conduct of the enquiries and the issuance of the Notices. He asked why HMRC’s
Special Investigations Unit was conducting the enquiries and said that this was
“not usual and is an unlawful use of power.” Mr Mathew informed Mr Straughair
that he would be applying to the Tribunal to issue closure notices. He also
said that he:
“would like to formally lodge a complaint on the
basis that this investigation is retaliatory in nature and based upon the
numerous complaints made against the HMRC by the group company Gold Nuts
Limited, of which I am a director…Any further information will need to be
requested by HMRC under direction from the First-tier Tribunal…I will request a
formal reference of complaint against your conduct and that of your department
in starting this investigation as you are abusing the legislative powers.”
27.
On 3 September 2014, Mr Straughair responded. He opened by saying
“Thank you for your letter of 11 August 2014. I have treated this as a letter
of complaint.”
28.
On 23 September 2014 Mr Mathew applied to the Tribunal to close all the
enquiries. On 20 October 2014 the Tribunal asked if he was also “wishing to
appeal against the HMRC Information Notice and if so please provide a separate,
completed, Notice of Appeal form.” On 3 November 2014 Mr Mathew sent a Notice
of Appeal to the Tribunal, seeking to appeal against the two Sch 36 Notices.
PRELIMINARY
MATTERS
29.
There were two preliminary matters: whether the case should be stayed,
and whether Mr Mathew had properly appealed the Sch 36 Notices.
Whether to stay the appeal
30.
We have already found as a fact that Mr Mathew is a director of a
company called Gold Nuts Limited. Two days before this hearing, the same
Tribunal heard the case listed as Gold Nuts Limited and others v HMRC (“Gold
Nuts”). The “others” are (a) companies in the Gold Nuts group (b)
Mr Budhdeo, a director of Gold Nuts, and (c) one or more other companies which
may be connected to Mr Budhdeo.
31.
The Gold Nuts case was adjourned because it raised important
preliminary issues which require a separate hearing, namely whether HMRC
can use their civil powers to obtain information with a view to pursuing a
possible criminal prosecution of Mr Budhdeo. There was no suggestion from
either party that there was any similar risk to Mr Mathew.
Submissions of the parties
32.
Mr Onalaja submitted that it was appropriate to stay Mr Mathew’s case
until the preliminary hearing of Gold Nuts because, if the Tribunal
upheld Mr Mathew’s Sch 36 Notices, the information or documents he provided
could be used by HMRC in the context of the Gold Nuts litigation. In
particular Mr Onalaja drew attention to the fact that HMRC were trying to
reconcile (a) a loan Mr Mathew said he had received, with (b) the statutory
accounts of companies which were parties to the Gold Nuts litigation.
He said that the SA enquiries into Mr Mathew’s return represented a “gradual
creep” into documents which really related to the Gold Nuts companies.
33. Mrs Naylor responded by
saying that Mr Mathew’s case was separate from that of the appellants in Gold
Nuts. These enquiries are into Mr Mathew’s SA tax returns. Key issues are
Mr Mathew’s employment income and the source of deposits into his bank
accounts. In relation to Mr Onalaja’s submission about the loans, she said
that HMRC have not approached the Gold Nuts companies for information about the
loans, but had only considered the material supplied by Mr Mathew together with
the statutory accounts submitted by the companies to HMRC. In summary, she
submitted that the enquiry into Mr Mathew’s affairs is proceeding along normal
lines and there is no reason to stay it.
34.
She also reminded the Tribunal that Mr Mathew had resisted being joined
to the Gold Nuts litigation on the basis that his affairs were separate,
and that HMRC had agreed with this.
Discussion and decision
35.
The key issue to be determined at the preliminary hearing of the Gold
Nuts litigation is the relationship between HMRC’s civil powers and a
possible criminal prosecution of Mr Budhdeo.
36.
The enquiries into Mr Mathew’s SA return and the Sch 36 Notices do not
relate to Mr Budhdeo’s personal tax position, but only to Mr Mathew’s. Mr
Onalaja did not explain how the provision of information about loans made to Mr
Mathew by companies involved in the Gold Nuts litigation could impact
upon any possible criminal proceedings against Mr Budhdeo, and we were also
unable to think of any interaction.
37.
Mr Mathew had previously submitted that the enquiries into his case were
separate from those in Gold Nuts. In his letter of 3 November 2014 to
the Tribunal, under the heading “Merger of the matter” he said “I wish to
proceed independently…as these are my personal matters and not to be considered
with the company I am associated with.”
38.
We agree with Mr Mathew’s position as articulated in that letter, and we
agree with Mrs Naylor that there is no reason to stay this case until after the
issuance of a final decision consequent upon the preliminary hearing of Gold
Nuts.
39.
One of the issues we considered when making our directions for the
preliminary hearing in Gold Nuts was whether or not to grant a privacy
direction. We decided not to do so, for the reasons given in that decision.
However, that was not clear at the time of Mr Mathew’s hearing and so the
first part of these proceedings, which considered whether or not to stay Mr
Mathew’s case behind Gold Nuts, was heard in private. However, because
we have subsequently decided that the Gold Nuts litigation will be in
public, there is no need to anonymise this part of our decision.
Appealing the Sch 36 Notices
The law
40.
Sch 36, para 32(1) provides that appeals against Sch 36 Notices must be
made in writing, within 30 days, to the HMRC Officer who issued the Notice. Once
a person has appealed, the Chapter 5 TMA provisions come into play, see Sch 36,
para 32(6).
41.
TMA s 49 says that a late appeal can only be accepted by HMRC if it has
been made “in writing” and that HMRC must also be “satisfied that there was a
reasonable excuse for not giving the notice before the relevant time limit.”
If HMRC refuse to allow a late notice of appeal to be given, the Tribunal may
give permission (TMA s 49(2)(b)). It is only if notice of appeal has been
given to HMRC that the appellant may notify the appeal to the Tribunal (TMA s
49D).
42.
Rule 20(1) of the Tribunal Rules says that “a person making or notifying
an appeal to the Tribunal under any enactment must start proceedings by sending
or delivering a notice of appeal to the Tribunal.” Rule 7(2) says that:
“If a party has failed to
comply with a requirement in these Rules, a practice direction or a direction,
the Tribunal may take such action as it considers just, which may include:
(a) waiving the requirement…”
The position in this case
43.
It is clear from the facts already set out that Mr Mathew did not appeal
the Sch 36 Notices by writing to Mr Straughair. We considered whether his
letter of complaint could be read as an appeal. However, we decided that it
could not, because:
(1)
it explicitly stated that it was a complaint;
(2)
it made no reference to the First Notice at all, still less to appealing
against that Notice;
(3)
it crossed with the Second Notice, so could not be an appeal against
that Notice; and
(4)
when Mr Straughair replied to the letter, he said “I am treated this as
a letter of complaint.” Had Mr Mathew wanted it to be treated as an appeal, he
could have responded by saying that the purpose of his letter had been
misunderstood. But he did not do so.
44.
Instead of appealing to Mr Straughair, as the statute requires and as
was explained in the covering letters sent with both Sch 36 Notices, Mr Mathew
completed a Notice of Appeal to the Tribunal, seeking to appeal against both
Sch 36 Notices. We accept that he may have read the letter from the Tribunal,
dated 20 October 2014, as indicating that this was the correct process.
45.
The second difficulty is that the Notice of Appeal was submitted on 3
November 2014, over six months after Mr Mathew had been issued with the First
Notice, and over two months after he had been issued with the Second Notice.
The statutory deadline is 30 days.
46.
We explained to the parties that the Tribunal had no jurisdiction to
hear an appeal made by way of a direct application to the Tribunal. We could
only hear an appeal which had been first made to HMRC. The parties asked for a
short adjournment which we granted.
47.
After the adjournment, the parties informed us that Mr Mathew had made
an oral appeal to Mr Straughair. Although the statute provided that the appeal
be in writing, HMRC had used their care and management powers to accept the
oral appeal. They had also accepted that Mr Mathew had a reasonable excuse for
making the appeals late. Mr Mathew then made an oral application for the
Tribunal to hear his appeals on the same basis as his earlier written Notice of
Appeal.
48.
We decided under Rule 7(2) that it was in the interests of justice to
admit an oral notification of Mr Mathew’s appeal, and we also accepted that his
oral application should be treated as containing the same material as in his
written Notice of Appeal.
RECORDS, PROOF
AND SUBMISSIONS
49.
This part of our decision first considers the law on “statutory records”
and the burden of proof in Sch 36 appeals, before setting out the parties’ main
submissions.
Statutory records
The legislation
50.
Sch 36, para 29(2) says that there is no right of appeal in relation to
“a requirement in a taxpayer notice to provide any information, or produce any
document, that forms part of the taxpayer's statutory records.”
51.
Sch 36, para 62 says that information or documents are “statutory
records” if “it is information or a document which the person is required to
keep and preserve under or by virtue of (a) the Taxes Acts, or (b) any
other enactment relating to a tax.”
52.
The definition in Sch 36, para 62 is therefore not free-standing, but
cross-refers to other provisions. In the case of an employee such as Mr
Mathew, the only relevant section appears to be TMA s 12B. This requires that
a person who is issued with a Notice to file an SA return, must keep “all such
records as may be requisite for the purpose of enabling him to make and deliver
a correct and complete return for the year or period.”
Can “information” be a
statutory record?
53.
The first question is whether TMA s 12B extends to “information” which
has not been written down, as well as to “documents.” The purpose of the
section is to require taxpayers to retain the material they need to file their
SA returns. It uses the word “records” rather than “documents.”
54.
The Oxford English Dictionary’s first two meanings of “record” refer to
phrases, such as “on record” and “to take record of.” The third meaning is “the
fact or condition of being preserved as knowledge or information, esp. by being
set down in writing.”
55.
We therefore find that information does not necessarily have to be set
down in writing before it can be a “record” and that therefore “information” as
well as “documents” comes within TMA s 12B.
For how long must
statutory records be preserved?
56.
TMA s 12B goes on to specify for how long the records should be kept.
This is important because Sch 36, para 62(3) says that “information and
documents cease to form part of a person's statutory records when the period
for which they are required to be preserved by the enactments mentioned in
sub-paragraph (1) has expired.” In other words, once the period of retention
specified in TMA s 12B has ended, the information and documents are no longer
“statutory records” and the person has a right of appeal.
57.
The TMA s 12B provisions on retention are somewhat complicated in a case
such as this, because Mr Mathew was issued with Notices to File some of his SA
returns long after the end of the tax year in question.
58.
TMA s 12B(1)(b) says that where the Notice to file an SA return was
issued before 31 January of the second year after the end of the tax year in
question (“the second 31 January”) then the records must be kept until “the end
of the relevant day.” The relevant day is the later of (a) the second 31
January and (b) the closure of any enquiry into the return, or, if no enquiry
is opened, the day on which an officer no longer has power to make those
enquiries.
59.
For example, the second 31 January after the end of the 2011-12 tax year
was 31 January 2014. On 4 June 2013, HMRC issued Mr Mathew a Notice to file
his 2011-12 return. The Notice was therefore given before 31 January 2014. As
a result, TMA s 12B(1)(b) applies, so the relevant day is the later of:
(1)
31 January 2014; and
(2)
the date on which any enquiries into the 2011-12 SA return are closed.
60.
Until the 2011-12 enquiry is closed, Mr Mathew has to retain any
statutory records “requisite for the purpose of enabling him to make and
deliver a correct and complete return” for that tax year. He also has no right
of appeal against a Sch 36 Notice requiring that information or documents.
61.
The same rule applies to the 2012-13 tax year: the Notice to file was
issued on 4 June 2013, well before 31 January 2015, being the second 31 January
after the end of the 2013-14 tax year. As a result, any statutory records have
to be preserved until the enquiry has been closed, and if any Item in the
Notices constitute statutory records, Mr Mathew has no right of appeal in
relation to that or those Items.
62.
When the Notice to file a return is given after the second 31
January, then TMA s 12B(2A) says that, where a person “has in his possession at
that time records which may be requisite for the purpose of enabling him to
make and deliver” his SA return, then he:
“shall preserve those records until the end of the
relevant day, that is to say, the day which, if the notice had been given on or
before [the second 31 January], would have been the relevant day for the
purposes of subsection (1) above”
63.
In other words, the deadline for preservation of the records is tied to
the later of (a) if an enquiry is opened, the closure of those enquiries and
(b) if no enquiry has been opened by the deadline for enquiries into that
return, that deadline.
64.
This provision applies to all the other relevant years: the Notices were
issued after the second 31 January, but enquiries have been opened into each of
these years. The records must therefore be preserved until the enquiries are
closed, and there would be no right of appeal against a Sch 36 Notice issued
which required Mr Mathew to produce any statutory records for those years.
Are any of the
documents/information statutory records?
65.
Given the number of information requests, we have considered this
question in relation to each Item in the Sch 36 Notices from §101 below.
The burden of proof
The “reasonably required”
test
66.
Mr Onalaja submitted that HMRC had the burden of showing that the
information and documents contained in the Sch 36 Notices were “reasonably
required.” He relied on Kevin Betts v HMRC [2013] UKFTT 430 (TC) (Judge Perez and Ms Stalker) (“Kevin Betts”) where the tribunal
recorded at [14] that it was “common ground” that the burden of proof was on
HMRC.
67.
As we have already noted, Mr Mathew’s case was classified as a “Basic”
case by the Tribunal, and so the parties were not directed to provide skeleton
arguments in advance of the hearing, as would have happened in a “Standard”
case. None of the earlier correspondence referred to the burden of proof.
HMRC made no response to Mr Onalaja’s submission during the hearing.
Case law on Sch 36 and
precursor provision
68.
We reviewed the case law. The tribunal in Eudora Thompson v HMRC [2013] UKFTT 103(TC) (Judge Brannan and Mr Williams) said at [62] that “the onus of
proof in relation to an appeal against an information notice lies on HMRC.”
But, as in Kevin Betts, there appeared to be no argument to the
contrary.
69.
We could find no decisions of the Upper Tribunal or the courts which
have considered this issue in the context of Sch 36 Notices provided to the
taxpayer. There is, however, case law on “without notice” or ex parte notices.
These are notices given to third parties, such as banks, with the approval of
the tribunal, without the taxpayer attending the hearing and sometimes without
the taxpayer knowing that the application is being made, see Sch 36 para 3(3).
One of the statutory requirements for such a notice is that the tribunal must
be “satisfied that, in the circumstances, the officer giving the notice is
justified in doing so,” see Sch 36 para 3(3)(b). If the third party wishes to
challenge the Notice, the only route is via judicial review, because no appeal
is possible, see Sch 36, para 29(3).
70.
In R (oao) Derrin Brother Properties Ltd v HMRC [2014] EWHC 1152 (Admin) (“Derrin”) the High Court dismissed a judicial review
application against ex parte notices issued to a number of banks and
others about their clients’ affairs. Simler J said at [14] that the question
of whether documents or information were reasonably required for the purpose of
checking a taxpayer’s position “depends on the conclusion of the officer, which
must be justified in the circumstances” and that the Tribunal must also be
satisfied “that the officer holds the relevant opinion.” She goes on to say at
[15] that:
“[15] A number of further
matters in relation to third party notices of this kind are well established by
reference to the predecessor s. 20 TMA 1970 scheme and apply with equal force
to Sch.36 notices, as the parties agreed. First, and significantly, as held in
R v Commissioners of Inland Revenue ex parte T C Coombs & Company
[1991] 2 AC 283 [Coombs], 300C-F, 302E-F (Lord Lowry) the Tribunal is
the independent person designated by Parliament with the duty of supervising
the exercise of HMRC’s intrusive powers. Parliament designated the officer as
the decision-maker and the Tribunal as the monitor of the decision. A
presumption of regularity applies to both, and is strong in relation to the
Tribunal in particular.
[16] Accordingly, in challenging a third party
notice, what must be proved are facts which are inconsistent or irreconcilable
with the authorised officer’s conclusion that documents are reasonably required
for checking the taxpayer’s tax position and the Tribunal being satisfied that
the officer is justified in the circumstances in giving that notice. The
resolution of this question will usually depend on confidential information or
evidence which is not before the court on judicial review. The Tribunal, able
to receive such confidential information or evidence in an ex parte
hearing, is therefore in a much better position to make a proper appraisal of
it than this court on judicial review. The fact that the Tribunal, having heard
an application, approved the giving of the notice is therefore evidence which
the court should take account of in this respect, not least since the
Tribunal’s approval is the real and intended safeguard in the statutory
scheme.”
71.
Simler J thus confirms that the House of Lords’ judgment in Coombs, which
concerned the precursor provisions in TMA s 20, can be relied on in relation to
Sch 36 Notices. One of the principles established in Coombs is that a
“presumption of regularity” applies both in relation to HMRC officers and to
the tribunal. This is a presumption that that
the statutory authority has acted lawfully and in accordance with its duty, and
if it applies, the burden is on the other party to rebut the presumption.
72.
If the same principle applies in
this case, the burden of proof would be on Mr Mathew to show that it was
not reasonable of Mr Straughair to require the information or documents. At
page 109(6) of Coombs Lord Lowry said (emphasis in original):
“What they [the appellants] need to do is prove
facts which are inconsistent (or irreconcilable) with the inspector's having
had a reasonable (not necessarily a correct) opinion when he gave the second
notice that the applicants had documents relating to the six companies which
contained or might contain information relevant to any tax liability to
which the taxpayer was or might be or might have been subject.”
73.
There are, however, two differences between Derrin and Coombs on
the one hand, and Mr Mathew’s case on the other, and we now consider
whether they change the position. The first is that in Derrin and Coombs
the courts were considering applications for judicial review whereas our
task is whether or not to allow an appeal against the notices. The second is
that the notices in both Derrin and Coombs were approved by the
tribunal before being issued.
Judicial review
74.
A decision can only be overturned on judicial review if it is found to
be illegal, unreasonable, or procedurally flawed. Judicial review is not the
same as an appeal. In an application for judicial review, the burden is
always on the applicant.
75.
On our analysis of both Derrin and Coombs, the
courts found that the burden was on the appellants because of the presumption
of regularity which applied to the making of the decision in the first place,
and not because the appellant always has the burden in judicial review
proceedings.
Notices issued without the
tribunal’s prior approval
76.
Where the tribunal has approved the issuance of the notice, the taxpayer
cannot appeal, but where (as in Mr Mathew’s case) there was no prior approval,
the taxpayer can appeal, see Sch 36, para 29,
77.
Does this mean that our hearing of Mr Mathew’s appeal is similar in some
ways to the ex parte proceedings? In particular, does Mr Straughair
have to justify to the tribunal in the course of the appeal his reasoning for
considering that the notice was “reasonably required,” in the same way as he
would have to satisfy the tribunal in an ex parte hearing that the
officer is justified in giving that notice? If so, does that mean that the
burden is on HMRC?
78.
The answer to that question can be established, we think, from the House
of Lords decision in Coombs. At page 110, Lord Lowry said:
“Parliament designated the inspector as the decision-maker
and also designated the commissioner as the monitor of the decision. A presumption
of regularity applied to both…the presumption that the inspector acted intra
vires when giving the notice can only be displaced by evidence which cannot
be reconciled with the inspector's having had the required reasonable opinion.”
79.
Later on the same page he makes it clear that the burden is on the
applicant to provide that evidence, asking (emphasis added) :
“Have the applicants proved that when giving the
second notice the inspector's opinion that there remained in the applicants'
power or possession relevant documents which they had not disclosed was not
reasonable?”
80.
Moreover, in Coombs the taxpayer did not seek to challenge the
decision of the Special Commissioner, but that of the HMRC officer, see page
111 at (3). Although the Special Commissioner’s approval of the notice was a
factor which the court considered when assessing whether or not the officer had
acted reasonably, it was the latter’s decision to issue the notice which was in
issue.
81.
Nevertheless, in both Derrin and Coombs the courts relied
significantly on the fact that the tribunal/special commissioner had seen the
evidence on which HMRC relied. In Derrin Simler J says that the
presumption of regularity is “strong in relation to the Tribunal in
particular,” that the tribunal will “usually” have received “confidential
information or evidence” during the ex parte hearing, and that “the
Tribunal’s approval is the real and intended safeguard in the statutory
scheme.” In Coombs at page 109(3) Lord Lowry said that “the fact that
the commissioner in these circumstances gave his consent is of paramount
importance.”
Concluding remarks on
burden of proof in relation to “reasonably required”
82. We find that the weight of
authority is that the burden of proof in relation to the “reasonably required”
test in Sch 36 Notices rests on the appellant, and not on HMRC.
83.
We note that this is consistent with the position in substantive tax
appeals. In Nicholson v Morris [1977] STC 162, Goff LJ approved the
words of Walton J, when he said that the reason for this was that:
“it is the taxpayer who knows and the
taxpayer who is in a position (or, if not in a position, who certainly should
be in a position), to provide the right answer, and chapter and verse for the
right answer.”
84.
If the burden of proof in relation to the “reasonably required” test
rests on the appellant, then a similar rationale could be put forward: it is
the taxpayer who knows the relevance of information or documents to his tax
position, because he knows the full facts. This analysis is also consistent
with the objective of Sch 36 taken as a whole, which is “to ensure that the
information which will ensure that the correct amount of tax can be
determined,” see HMRC v Tager [2015] UKUT 40 (TCC) at [16], per Judge
Bishopp.
85.
However, we acknowledge that the differences between Derrin and Coombs
on the one hand, and Mr Mathew’s position on the other, mean that it
remains arguable that the burden is on HMRC. We were also conscious that we
had very limited submissions.
86.
We therefore decided to approach each Item of the Notices on the working
assumption that HMRC had the burden of showing that it was reasonable to
require the information or documents. Had we found that HMRC had not met that
burden, we would have adjourned the case for further submissions in relation to
the burden of proof.
87.
As will be seen from the later parts of our decision, we found that HMRC
had met the burden in relation to each of the Items which remain in dispute, so
we have not needed to decide this point. That may be the task of another
tribunal, on another day.
Burden of proof in
relation to “statutory records”
88.
There is a further point, raised by neither party: who has the burden of
proof in the context of statutory records? In other words, if HMRC assert that
a document is a statutory record, is the burden on the appellant to prove the
contrary? This is important, because, as we have already noted, if the
documents/information are “statutory records,” the appellant has no right of
appeal.
89.
In the context of a company, or even a self-employed business, it is
usually relatively straightforward to identify statutory records. These will
include a business bank accounts, invoices, purchase orders, till rolls etc.
But it is more problematic for individuals. What documents/information does a
person require in order “to make and deliver a correct and complete return for
the year or period?”
90.
Consider some of the Items required under the Notices issued to Mr
Matthew. He sold a property in Stanmore. HMRC asked for documents/information
to establish whether he had received rental income, and whether or not the
disposal gave rise to a capital gain. If Mr Mathew did receive rental income,
and/or there was a capital gain, many or all of the documents/information
requested by HMRC via the Sch 36 Notice will be statutory records, because they
will be required for the correct completion of Mr Mathew’s SA return. But HMRC
do not know if there was rental income, and they do not know if there is a
capital gain: only Mr Mathew knows these facts. The citation from Nicholson
v Morris, set out at §83 above, is apposite.
91.
If the burden is on the appellant in relation to statutory records, he
can of course appeal to the Tribunal if he considers that an item which HMRC
assert is a statutory record is not such a record, and provide the relevant
evidence.
92.
However, as we had no submissions on this point, we have taken the same
approach in relation to statutory records as we have as in relation to the
“reasonably required” test, namely that HMRC have the burden of showing that
the documents/information constitute a statutory record. If our approach
would have meant that or more documents/information would be removed from the
Notices, we would have adjourned the case for further submissions. But as the
rest of our decision makes clear, this was not the position.
The parties’ main
submissions
Reasonably required?
93.
Mr Straughair said that there were discrepancies between Mr Mathew’s
lifestyle and his declared earnings. HMRC had “access to databases” which
indicated that Mr Mathew’s income was “possibly understated” and that his SA
returns disclose an income after personal allowances which has fallen from
£123,489 in 2008-09 to £6,151 in 2011-12. Mr Straughair said he was seeking to
establish in particular whether Mr Mathew received employment income dressed up
as loans, and whether he was receiving other taxable income or gains which had
been omitted from his tax returns.
94.
Mr Onalaja did not dispute that there was a difference between Mr
Mathew’s taxable income and his expenditure. He invited Mr Straughair simply
to find that the money received by Mr Mathew as loans was in fact earnings. He
submitted that HMRC had enough information to (a) withdraw the Sch 36 Notices
and (b) close the enquiries on that basis and make assessments.
95.
Mr Straughair responded by saying that HMRC had a duty to make
assessments to the best of its judgement, and that he currently had
insufficient information to make the assessments. The information and documents
in the Notices were, in his submission, reasonably required for the purposes of
establishing Mr Mathew’s tax position.
Fishing expedition?
96.
Mr Onalaja said that it was not reasonable of Mr Straughair to continue
to ask for so much detail; that some of the Items in the Notices were in the
nature of a “fishing expedition” and that HMRC were “just prolonging enquiry by
requesting more and more documents.” Mr Straughair sought to resist this by
reference to the particular Items set out below.
Retaliatory action?
97.
In his witness statement Mr Mathew said that HMRC’s enquiries were “a
retaliatory action to the complaints made by the [Gold Nuts] group” and he made
similar statements in his letter of complaint, set out earlier in this
decision. Mr Onalaja made related submissions. In particular, he said that
the enquiries into Mr Mathew were being conducted by the same individuals who
were investigating the parties to the Gold Nuts litigation.
98.
In response, Mr Straughair repeated his submissions that the enquiries
had been triggered by the gap between Mr Mathew’s income and his lifestyle. He
gave evidence, which we accepted, that he dealt only with SA enquiries and had
nothing to do with corporation tax. He acknowledged that he was part of HMRC’s
Special Investigations Unit and that same Unit was also working the enquiries
into the Gold Nuts group and Mr Budhdeo.
Our approach
99.
We considered these submissions in the context of each Item in the
Notices, when answering the following questions:
(1)
whether they were “statutory records” against which no appeal is
possible;
(2)
whether Mr Mathew had complied with the requirements; and if not
(3)
whether information or documents which were not statutory records were
“reasonably required” for the purposes of checking Mr Mathew’s tax position.
100.
Our overall conclusions on the “fishing expedition” and “retaliatory
action” submissions are at §184 and §186 respectively.
THE
FIRST NOTICE
Item 3: Schedule of
interests
The Notice, correspondence
and submissions
101.
Item 3 of the First Notice is that Mr Mathew provide:
“A Schedule of any shares held in any entities, both
within the UK and overseas at any time during the period, even if you hold them
as nominee or in another name. The name and address of the entity should be
provided, along with the date and cost( if any) of acquisition. If any
disposals have been made during the year, please provide the date and value of
sale. As an example this list should include (but not be limited to) interests
in companies, partnerships and joint ventures).”
102. On 9 May
2014, Mr Mathew’s then agent, Mr Gupta of ARN Gupta & Co provided
information about four companies in which Mr Mathew owned shares. The
information was provided under the heading “Business Interests.”
103. On 14 May
2014 Mr Straughair called Mr Gupta and asked him to confirm whether the
information was a complete list of all Mr Mathew’s shareholdings. He also
pointed out that neither the date nor the cost of acquisition had been
provided. Mr Gupta said he would check with his client.
104. On 30 May
2014, Mr Gupta sent Mr Straughair the address of each of the four companies
listed in the letter of 9 May 2014. He also said that “the amounts paid for
the shares in the above companies was the nominal value of each share” which
had been given in the letter of 9 May 2014. The paragraph in Mr Gupta’s letter
is again headed “business interests.” Mr Mathew’s witness statement confirms
that he has provided information about his “business interests.”
105. Mr
Straughair said at the hearing that the information was incomplete, because it
does not confirm that it is a complete list of all shares held. Mr Onalaja
asked if HMRC could obtain some of this information from other sources, and Mr
Straughair agreed that this may be possible. Mr Onalaja submitted that HMRC
should use these other sources rather than a Sch 36 Notice.
Schedule of interests:
statutory records?
106. As we have
already seen, TMA s 12B(1)(a) requires that a person such as Mr Mathew who is
not in business “keep all such records as may be requisite for the purpose of
enabling him to make and deliver a correct and complete return.”
107. Is a
schedule of interests in entities a “statutory record”? This is another
example of the “burden of proof” issue we identified earlier. It is very
difficult for anyone other than Mr Mathew to know the answer to this question.
If he has bought and sold shares during the year, then clearly that information
and the related documents need to be retained for the purposes of his SA
return. But if there are no disposals and no distributions, his shareholdings
will be irrelevant to his tax return.
108. On the
basis of the information available, we decided that a schedule of interests is
not a statutory record in Mr Mathew’s case. He therefore has a right of appeal
against Item 3.
Schedule of interests:
compliance by Mr Mathew?
109. Mr Mathew
has not confirmed whether or not the four companies named in the letter of 9
May 2014 constitute a complete list of all entities in which he has an interest
(including any which he may hold as a nominee or in another name), despite Mr
Gupta saying he would confirm this one way or the other with his client. Mr
Mathew has also failed to tell HMRC whether there has been any change to his
interests, whether by acquisition or disposal, during the year. We find that
this Item has been complied with only in part.
Schedule of interests:
reasonably required?
110. Is the
requirement reasonable? Mr Mathew has accepted that there is a gap between
taxable income and expenditure. Although it is Mr Mathew’s case that he is
living on loans, it is clearly reasonable for Mr Straughair to check whether
there are other sources of income and/or gains which have contributed to
filling the gap between Mr Mathew’s incomings and outgoings.
111. We also
find that it is reasonable for the requirement to extend to all entities in
which Mr Mathew has an interest, not just those which relate to business: if
there are dividends or gains from portfolio holdings this is relevant to the
acknowledged gap between income and expenditure.
112. We do not
accept Mr Onalaja’s submission that, because HMRC may be able to find some of
this information from other sources, it is unreasonable for Mr Straughair to
require Mr Mathew to provide it. The law requires only that the “the
information or document is reasonably required by the officer for the purpose
of checking the taxpayer's tax position.” HMRC do not have to exhaust other
information sources before turning to the taxpayer.
Schedule of interests:
decision
113. We have
varied the Notice to reflect the fact that some information has already been
provided and to include confirmation of completeness, and have made some other
minor amendments.
114. The Notice
ends by saying the list “should include (but not be limited to) interests in
companies, partnerships and joint ventures.” We have separated the
requirements relating to companies from the others, and therefore divided the
Item into 3(a) and 3(b). The second of these relates to “any interests in any
partnership, limited partnership, limited liability partnership or joint
venture.” We think this is clearer and more specific than the very open
wording of the original notice.
Item 4: Benefits in kind
other than loans
The Notice, correspondence
and submissions
115. Item 4 of
the Notice requires Mr Mathew to provide a Schedule of any benefits arising
because of his position in an entity, whether as director, shareholder, member
of the Board, partner, employee or nominee.
116. Mr Gupta’s
letter of 9 May 2014 simply said that “the employment income of Mr J Mathew is
as per the submitted 2011/12 return.” When Mr Straughair spoke to Mr Gupta on
14 May 2014, he asked whether Mr Mathew received any company benefits, and Mr
Gupta said he would check again with his client. In the letter dated 30 May
2014, Mr Gupta said “there were no taxable benefits that were received from his
employments.”
117. Mr
Straughair said in cross-examination that he was concerned whether this was
complete and correct. Mr Onalaja said that he should take up any issues about
benefits with the relevant employing company or companies.
Benefits other than loans:
decision
118. Mr Mathew
was asked to provide information about any benefits in kind. He has clearly
answered that there were none. However, we note that there remains an issue
about whether the loans (if they are in fact loans) are interest-bearing or
not. We deal with that in relation to the Second Notice (2011-12) below.
119. We vary
the Notice to remove Item 4, because Mr Mathew has complied with it, subject to
the interest-bearing loans point.
120. If Mr
Straughair has concerns about the accuracy of the statement that Mr Mathew has
no benefits in kind, that is a separate matter, which goes beyond this appeal.
HMRC cannot simply repeat information requests because they do not trust the
answers.
Items 4 and 5: Loans
The Notice and
correspondence
121.
Items 4 and 5 of the Notice require:
(1)
a Schedule of any benefits or loans received because of Mr Mathew’s
position in an entity, such as a director, shareholder, partner, employee or
nominee (Item 4);
(2)
for each director’s loan account, a chronological breakdown with
narrative description for amounts received (Item 5);
(3)
details and evidence to support any repayments made on these loans,
including bank statements showing the payments made (Item 5).
122. Attached
to Mr Gupta’s letter of 9 May 2014 was a Schedule setting out two loans. The
first was stated to be from Gold Nuts Ltd. It shows receipts of £93,261, paid
in 23 separate amounts during the year. In most months there were two sums of
either £2,500 or £3,000. The last item on the list is £6,558 relating to car
hire purchase charges paid by the company.
123. The second
loan was for £50,000. It was received from Noviscom on 23 December 2011. On
29 December 2011, the Schedule shows that Mr Mathew paid this money to Gold
Nuts Ltd, to reduce the loan from that company to £43,261.
124. When Mr
Straughair spoke to Mr Gupta on 14 May 2014, he asked if this list was
complete. Mr Gupta said that it was. Mr Straughair said that Mr Mathew had
not provided the detailed proof of payment and evidence, given that the bank
statements provided did not show any receipts from Gold Nuts Ltd.
125.
In Mr Gupta’s second letter of 30 May 2014, he said that:
“the loans were received directly by bank transfer
from Blackbay Ventures Ltd (“BBL”). The loans were from BBL and not Gold Nuts
Ltd as referred to in our previous letter. The other loan was received directly
by bank transfer from Noviscom. These loans were merely cash loans for Mr J
Mathew’s personal use.”
126.
On 12 June 2014 Mr Straughair wrote to Mr Gupta, saying:
“I will need sight of each Director’s Loan Account
(“DLA”) with each company held by your client. I would expect each DLA to have
an opening and closing balance and show all movements within the period. I
have also asked for a narrative breakdown but that has not been provided. I
would expect this to describe the nature of the payment and how it was paid,
for example were the debits made by cash or by bank payments and what was the
purpose of each payment. A DLA is a statutory document and I still consider
Item 5 of the schedule of information and documents is outstanding.”
127. On 22 June
2014 Mr Gupta provided a detailed analysis of what was now said to be the loan
from BBL. The opening balance is shown as a credit of £31,458 – in other
words, an amount owed by BBL to Mr Mathew. There follows the same list of
payments as in the Schedule attached to Mr Gupta’s 9 May letter, other than
that the car hire payment is now £6,001 and not £6,558 and one payment for
£10,000 is shown as having been received on 19 December 2011 rather than 31
December 2011.
128. Next to
each of the payments Mr Gupta has either put a cross-reference to Mr Mathew’s
HSBC bank statement, or written “cash received.”
129. Below the
list are the following items, headed “Repayment”:
|
Month/Yr
|
|
Date paid
|
|
Explanation
|
|
Dec 11
|
£50,000
|
29/12/11
|
CHAPS
|
Loan repayment
|
|
June 11
|
£610
|
30/6/11
|
|
Undrawn salary credited
|
|
Jan 12
|
114
|
30/1/12
|
CHAPS
|
Expenses paid on behalf
of company
|
|
Total
|
50,724
|
|
|
|
130. The
balance on the account at the end of the year is shown as £10,522 owed by Mr
Mathew to BBL. The Schedule also shows interest of £2,221.97 owing on the
loan, which has been added to the amount outstanding.
131.
Mr Gupta’s covering letter said:
“you will now note from the further information
provided in this letter that our client borrowed c £91k during the period for
his living expenses. This should now explain how our client funded his
living.”
132. Mr Gupta
also said that while a director’s loan account may be a statutory record in the
context of the company, it was not a statutory record in the context of the
individual director.
133. On 7 July
2014, Mr Straughair called Mr Gupta. He said he was struggling to reconcile
the loan arrangements, and his concerns “were compounded by the fact that Mr
Mathew was not made a director of Blackbay until 23/5/12” – a date after the
end of the tax year. Mr Gupta responded by saying that “Mr Mathew was a
director of the overall group connected to Blackbay...’”
134.
On 11 July 2014 Mr Straughair wrote setting out his concerns in more
detail. These were that:
(1)
the source of the credit balance owed to Mr Mathew from BBL i.e., why
BBL owed money to Mr Mathew;
(2)
BBL’s accounts as filed with HMRC show the loan as non-interest bearing;
(3)
given that the loans were to fund living expenses, they have the
hallmark of remuneration, so what assurances did Mr Mathew provide to the
companies that the loans would be repaid;
(4)
how all the loans with the companies have been treated, given that Mr
Mathew received this money from a company of which he was neither an employee
nor a director.
Loans: statutory records?
135. If the
loans are in fact salary, then a schedule of amounts paid to him is likely to
be “requisite for the purpose of enabling [Mr Mathew] to make and deliver a
correct and complete return.” If, instead, the payments were in fact loans and
not salary, they will only be “requisite” for Mr Mathew’s tax return if the
interest paid is insufficient to eliminate a benefit in kind charge.
136. As we have
decided to proceed on the basis that HMRC have the burden of proof, we have
therefore gone on to consider the position on the basis that the schedule of
loans is not a statutory record and that Mr Mathew has a right of appeal.
137. In coming
to this conclusion, we did not ignore Mr Onalaja’s invitation to HMRC that they
find the loans to be salary. It appeared to us that Mr Onalaja was putting
this forward as a way of closing the enquiries, and was not to be taken as an
offer of settlement. In other words, he was inviting HMRC to assess Mr Mathew
on that basis but leaving open the possibility of appealing the resulting
assessment.
Loans: decision
138. Mr Onalaja
has not argued that these amounts are not “reasonably required” but rather that
enough information is already in Mr Straughair’s hands. Mr Straughair’s
position is that he still requires further information about the loan position.
139. Although
there is no dispute on this point, we agree that Items 4 and 5 are reasonably
required for the purposes of checking Mr Mathew’s tax position.
140. Has Mr
Mathew provided the required information? He has said that he has two loans,
one from BBL and one from Noviscom. We find that he has thus met Item 4 and
the first part of 5 in that he has provided a Schedule, subject to confirmation
that (a) there are no other loans and (b) an explanation of the basis on which
the loan has been provided by BBL given that he was neither a director nor an
employee of that company in 2011-12. To the extent that there are other
unresolved loan-related issues, they are picked up in the Second Notice
(2011-12) and we deal with them there.
141. We have
therefore varied the Notice to remove most of the requirements of Items 4 and
5, subject to the two points in the previous paragraph.
Item 6: Bank accounts
142.
Item 6 required that Mr Mathew provide:
“All bank and/or BS books or statements, cheque book
stubs, and deposit book counterfoils [“bank statements etc”] from any account
into which he received his employment income and into which he had received
income from or made payments to a director’s loan account.”
143. Attached
to Mr Gupta’s letter of 9 May 2014 are copies of Mr Mathew’s HSBC bank account
xxx16. Mr Gupta said that “this contains the employment income and directors
loans.”
144. On 11 July
2014 Mr Straughair wrote to Mr Gupta, saying he was unable to trace the salary
payments shown on Mr Mathew’s SA return (which were from a company called
Venture Pharmacies Ltd) to the HSBC account. Further, the bank statements show
some payments from BBL as being “salary” although Mr Mathew was neither an
employee or director of that company in 2011-12. In the same letter, Mr
Straughair said that he had identified £50,031 of miscellaneous receipts paid
into the HSBC account. As a result he included a wider information requirement
relating to bank statements etc in the Second Notice (2011-12), see §173.
Bank accounts: decision
145. This Item
has been subsumed into Item 5 of the Second Notice (2011-12) and we have
removed it from the First Notice.
Item 7: charges on
personal assets
146. Item 7 of
the First Notice asked for “loan or mortgage agreements in relation to any
personal asset and the bank statements etc of the account(s) from which related
payments are made.” We had no difficulty in finding that this information did
not constitute “statutory records” as loans for purchasing personal assets are
not “requisite” for the purposes of delivering a complete and correct SA
return.
147. Mr Gupta
responded to this Item of the First Notice on 30 May 2014 by saying that Mr
Mathew had two unsecured five year loans of £10,000, one from HSBC (from 2008)
and one from Halifax (from 2007) and that he had no other loans. At the
hearing, Mr Straughair said that this Item was still outstanding. Mr Onalaja
made no submissions.
148. In a case
such as this, where the issue is whether there is a discrepancy between a
person’s lifestyle and his means, it is reasonable for HMRC to ask for details
of other financial commitments. As we have already noted, Mr Onalaja did not
argue otherwise.
149. Mr Gupta
provided details of two unsecured loans but has not confirmed whether this is a
complete list. He has not provided details of the bank account from which
these loans are repaid (if, indeed, regular repayments are required). We have
varied the Notice to take these points into account.
Decision on the First
Notice
150.
We therefore vary the First Notice as follows:
(1)
Items 1, 2, 8, 9, 10, 11 and 12 have been removed entirely on the basis
that they have been complied with;
(2)
Item 6 has been removed entirely as it is subsumed into Item 5 of the
Second Notice (2011-12);
(3)
Items 3, 4, 5 and 7 have been varied on the bases explained above.
151.
The Notice, as varied, is set out in Appendix 1.
THE SECOND
NOTICE
152. The Second
Notice has two Schedules, one relating to 2011-12 and the other to 2012-13. We
consider each in turn.
The Second Notice
(2011-12)
Item 1:
Employment/director contracts
153.
Item 1 requires the provision of employment/director contracts between
Mr Mathew and seven named companies. These are:
(1)
the four companies in which Mr Mathew has said he has a business
interest;
(2)
Venture Pharmacy Limited, the company identified as Mr Mathew’s employer
in his SA return;
(3)
two other companies which we understand to be part of the Gold Nuts
group, Dispensary Holdings Ltd and Leyton Orient Dispensary Ltd.
154. A person
does not normally have to refer to his employment contracts in order to
complete his SA returns. We find that none of these documents are “statutory
records.”
155. Mr Onalaja
submitted that information about directorships could be obtained from Companies
House and thus that it was not reasonable of HMRC to ask Mr Mathew to “dig out”
his employment contracts. For the reason already set out at §112, we reject
this submission.
156. As already
noted at §143, Mr Straughair said in correspondence that he had been unable to
reconcile the salary payments included in Mr Mathew’s SA return with the
receipts shown on his HSBC bank statements, despite that being the account into
which Mr Gupta had stated that Mr Mathew’s salary was paid. At the hearing, Mr
Straughair said he needed to understand “which companies [Mr Mathew] is
actually employed by and which are actually paying him.”
157. In this
Item, Mr Straughair has asked for information about companies already referred
to by Mr Mathew, plus those companies where other third party information
indicates that he is either an employee and/or a director. Mr Onalaja did not
seek to argue that any one or more of these companies should not be on the
list.
158. On the
bases that (a) there is a disconnect between the employment income on Mr
Mathew’s SA return and the bank statements into which that salary was said to
be paid, and (b) the links between Mr Mathew and the companies listed, we find
that Item 1 is reasonably required.
159. The
confusion between payments from Gold Nuts Ltd and BBL indicates that there is
at least some informality in the relationship between Mr Mathew and one or more
of the companies for which he provides services. It is therefore possible that
there are no formal contracts between Mr Mathew and any of the companies. We
have therefore varied the Notice to add an information requirement in the same
terms.
Item 2: Loan agreements
160.
Item 2 requires the provision of loan agreements between Mr Mathew and
(a) BBL and (b) Noviscom. The background to this Item is set out at §120ff.
For the same reasons as there set out, we have proceeded on the basis that the
loan agreements are not statutory records.
(1)
Mr Straughair said that he wants to establish in particular whether the
loans are interest bearing, and
(2)
their repayment terms.
161.
We note the following:
(1)
the conflict between the BBL’s statutory accounts (which show that the
loans are non-interest bearing), and the Schedule attached to Mr Gupta’s letter
of 30 May, which show interest added to the loan balance;
(2)
the original information provided by Mr Gupta that the loans totalling
£93,261 made by way of regular monthly payments were from Gold Nuts, and the
subsequent letter correcting that;
(3)
the use of a loan from Noviscom to repay a loan from BBL; and
(4)
Mr Gupta’s statement that the loans are used for Mr Mathew’s living
expenses.
162. Of these
points, (1) and (2) demonstrate that the information so far provided has
contained inconsistencies, point (3) is unusual and (4) throws into sharp
relief the question of repayment terms. Against that background, we find that
it is entirely reasonable for Mr Straughair to require the information at Item
2, that the burden of proof is satisfied and we uphold this Item in the
Notice.
163. For the
same reason as in relation to Item 1, it is possible that there are no formal
loan agreements. We have thus varied the Notice to require Mr Mathew to
provide the answer to these two questions as “information” if the answer to
Item 2 is that there are no formal loan agreements.
Items 3 and 9: Credit
balance with BBL
164. At Item 5
of the First Notice Mr Straughair asked for details of loan repayments. Mr
Gupta provided the repayment schedule set out at §128. An explanation of the
opening credit balance was not within Item 5, as it is not a “repayment.” Mr
Straughair has therefore included requests for related documents and
information as Items 3 and 9 of the Second Notice 2011-12. We have taken the
position that these are not “statutory records” for the same reasons as in
relation to the loan information.
165. Mr Onalaja
suggested that proof of the existence of the credit balance should be sought
from BBL, not from Mr Mathew. Again, for the reasons set out at §112, we
reject that submission.
166. We first
considered whether the credit balance is relevant to Mr Mathew’s tax position,
and find that it is. If BBL owed Mr Mathew £31,458 at the beginning of the
tax year, the figure which Mr Mathew needs to repay has reduced by that
amount. If the loan should, as Mr Onalaja suggests, be treated as earnings,
then the credit balance reduces those earrings. If the loan is in fact a loan,
but is non-interest bearing, the credit balance reduces the benefit in kind
charge.
167. We next
asked whether it was reasonable of HMRC to seek to validate the statement that there
was an opening credit balance, rather than simply accepting what Mr Gupta
said. The effect of the credit balance is that the payments made to Mr Mathew
by BBL between April and September 2011 are not loans to him but
repayments of amounts borrowed from him. However, the Schedule
provided in May 2014 describes these first ten payments as “loans” to Mr
Mathew. There is a conflict between this presentation and the credit balance.
We find that HMRC have met the burden of proof, and that the information/documents
explaining the credit balance are reasonably required for the purpose of
checking Mr Mathew’s tax position, and we uphold Items 3 and 9.
Items 4, 6 and 7 Disposal
of property at Stanmore Hill
168. In his
letter of 11 July 2014, Mr Straughair informed Mr Gupta that he had identified
from the Land Registry that Mr Mathew had disposed of a property at Stanmore
Hill on 12 December 2011, but that there was no record of any capital gain in
his 2011-12 tax return.
169. Item 4
lists certain specified documents relating to the disposal of this property,
including those which would be relevant to the calculation of a capital gain,
and also those which relate to rental income. Item 6 requires a schedule of
any rental income from the property at Stanmore Hill, including the name and
address of any tenant and item 7 requires Mr Mathew to say whether or not the
property was disposed of to a connected party.
170. At the
hearing, Mr Onalaja submitted that there was no evidence that the property was
being rented out. He made no submissions on the capital gain. Mr Mathew’s
witness statement provided no information about this property.
171. Are these
documents/information “statutory records”? As we have already identified at
§90, this is a difficult question for anyone other than Mr Mathew to answer.
If the property was let out, and if its sale gave rise to a capital gain, the
answer is yes. But if the property was lived in by relatives who paid no rent,
and if (for some reason) it did not give rise to a capital gain on sale, then
the documents/information would not be statutory records. For the reasons set
out at §90 we have assumed that they are not statutory records, so that Mr
Mathew has a right of appeal.
172. An SA
return covers both income and gains. Mr Straughair has identified a property
which did not feature in Mr Mathew’s SA return, either as a rental property or
as an investment. If the property was rented out, that rental income will help
to explain the acknowledged gap between Mr Mathew’s income and his expenditure.
If it was sold so as to give rise to a gain, the same is true.
173. We find
that HMRC have met the burden of showing that the documents/information
requested in Items 4, 6 and 7 are reasonably required for the purpose of
checking Mr Mathew’s tax position and we uphold these Items of the Notice.
Item 5: Bank Accounts
174. Item 5 is
that Mr Mathew provide all bank accounts etc held in his own name or jointly.
Item 8 asks Mr Mathew to explain some thirty receipts totalling £50,031 into
his HSBC bank account: Mr Straughair identified these from bank statements
provided in response to the First Notice. Mr Straughair accepted during
cross-examination that £10,000 of these receipts formed part of the sum
disclosed as a loan from BBL.
175. Again,
only Mr Mathew knows whether his bank statements are “statutory records.” We
have proceeded on the basis that they are not, and that Mr Mathew therefore has
a right of appeal.
176. Mr
Straughair also said that the Schedule provided by Mr Gupta showed Mr Mathew as
receiving seven cash payments each of £2,500, and he would have expected to see
at least some of this deposited in his bank accounts, but he had not been able
to trace any of this money to the HSBC bank account provided.
177. Apart from
the £10,000 mentioned above, HMRC have not been provided with an explanation
for any of the deposits into this account. It appears from the HSBC bank
statement that Mr Mathew may have other bank accounts. The enquiry was
originally opened because HMRC had concerns that there was a gap between Mr
Mathew’s declared income and his lifestyle.
178. We again
find that HMRC have met the burden of proof in showing that the documents and
information required by Items 5 and 8 are reasonably required for the purpose
of checking Mr Mathew’s tax position and we uphold these Items of the Notice.
Conclusion on the Second
Notice (2011-12)
179.
For the reasons given above, we uphold the Second Notice (2011-12) in
its entirety and confirm Items 1-9 as set out in that Notice under Sch 36, para
32(3)(a). We vary the Notice under Sch 36, para 3(2)(b) to add the following
two Items:
(1)
If there are no formal contracts between Mr Mathew and any one or more
of the companies in Item 1, then he is to provide a list of all companies of
which he was either an employee or a director, or both, during the year (Item
10); and
(2)
If there are no formal loan agreements between Mr Mathew and either or
both of Noviscom and BBL, he is to provide a formal statement as to whether the
loans are (a) interest bearing and (b) whether there are any arrangements in
place for repayment, together with supporting evidence for both (a) and (b)
The Second Notice
(2012-13)
180.
This part of the Notice required the production of three Items:
(1)
copies of employment contracts with thirteen named companies;
(2)
bank statements etc for all personal and business bank accounts in Mr
Mathew’s own name or jointly;
(3)
specified information about all loan accounts.
181. We have
already explored in some detail the similar Items in relation to 2011-12 and
decided that they do not constitute statutory records, and that HMRC have met
the burden of showing that they are reasonably required for the purpose of
checking Mr Mathew’s tax position in 2011-12.
182. No
particular submissions were made by Mr Onalaja, and no information was put
forward in Mr Mathew’s witness statement, which would form any basis for
distinguishing 2012-13 from 2011-12. On the evidence the gap between his
disclosed earnings and his lifestyle is likely to have increased: in 2011-12
his SA return shows earnings of only £6,999, around 50% of the figure for
2011-12 and only 5.4% of the earnings in his 2008-09 return.
183. We
therefore confirm the Second Notice (2012-13) in its entirety under Sch 36,
para 32(3)(a). For the same reasons as given in relation to the Second Notice
(2011-12), we vary the Notice under Sch 36, para 32(3)(b).
CONCLUSIONS
ON THE SCH 36 NOTICES AND DIRECTION
184. Having
considered each of the Items, we end this part of our decision by setting out
our conclusions on whether or not some or all of the Items in the Notices were
in the nature of a “fishing expedition” and/or an abuse of power by HMRC, as Mr
Onalaja submitted.
185.
We agree that HMRC are not permitted to use the Sch 36 powers to “fish”
for possible issues. In Derrin at [20], Simler J said:
“HMRC may not use their Sch.36 powers for a fishing
expedition – whether for their own or the purposes of another revenue
authority. A broadly-drafted request will not be valid if in reality HMRC are
saying “can we have all available documents because they form so large a class
of documents that we are bound to find something useful”. What is required is
that the request is genuinely directed to the purpose for which the notice may
be given, namely to secure the production of documents reasonably required for
carrying out an investigation or enquiry of any kind into another taxpayer’s
tax position. It is no objection however, to the issue of a third party notice
that it seeks disclosure of ‘conjectural’ documents; in other words documents
that might not exist: R v Commissioners of Inland Revenue ex parte Ulster
Bank Ltd [1997] STC 832, 841f-h (Morritt LJ).”
186. However,
for the reasons given above, we find that the Items in the Notices as varied
are “genuinely directed to the purpose for which the notice may be given” and
that Mr Straughair is not on a “fishing expedition.”
187. Mr Onalaja
also submitted that HMRC were abusing their powers. This tribunal does not
have a judicial review jurisdiction, so this is not a matter we can take
decide, or take into account as part of the appeal. However, for completeness
we record that there was no evidence before us to support a submission that
that Mr Mathew is being improperly investigated in retaliation for challenges
made to HMRC by the parties to the Gold Nuts litigation. Although Mr
Straughair is part of Special Investigations, that fact, of itself, takes us
nowhere. He told us, and we accepted, that his enquiry came about because he
identified a gap between Mr Mathew’s income and his lifestyle. That this is
true has been accepted by Mr Gupta and Mr Onalaja and is reflected in his
disclosed earnings and his bank statements. We have found that the Items
contained within the Sch 36 Notices were “reasonably required” in the context
of Mr Straughair’s concerns about his means and the information so far provided
to HMRC. In short, we found no foundation for the submission that HMRC were
abusing their powers by enquiring into Mr Mathew’s SA returns.
188. The First
and Second Notices as varied are set out at Appendix 1 to this decision. Under
Sch 36, para 32(4)(a) we direct that Mr Mathew comply with the Notices, as
varied, by 30 days from the date of issue of this decision.
THE
CLOSURE NOTICE APPLICATIONS
The law on closure notices
189. The burden
of showing that there are “reasonable grounds” for not issuing a closure notice
rests on HMRC (TMA s 28A(6)). The case law on closure notices provides
extensive guidance, which we briefly summarise here.
190. First, the
statutory provisions are “constructed so as to produce a reasonable balance” between
HMRC’s enquiry and investigation powers on the one hand, and protection for
those who wish to question whether the use of those enquiry powers continues to
be justified, see HMRC v Vodafone 2 [2006] STC 483 at [44]
per Park J in the context of the similar legislation relating to
companies.
191. In issuing
a closure notice an officer is performing an important public function in which
fairness to the taxpayer must be matched by a proper regard for the public
interest in the recovery of the full amount of tax payable, see Tower
MCashback v HMRC [2011] STC 1143 (“Tower”), per Lord Walker
at [18]. Lord Hope, in the same case, said at [83] that the closure notice
should be “as informative as possible” because it will serve the function of
identifying the subject matter of any appeal.
192. However,
that does not mean that a closure notice cannot be ordered until the HMRC
officer has “pursued to the end every line of enquiry or investigation,” see Eclipse
Film Partners No 35 LLP v HMRC [2009] STC (SCD) 29 (“Eclipse”) at
[19] per Special Commissioner Sadler. As Lord Walker said in Tower at
[18], if the facts are complicated and have not been fully investigated, and if
their analysis is controversial, the public interest may require the notice to
be expressed in more general terms. In D’Arcy v HMRC [2006] UKSPC 549 (“D’Arcy”)
at [12], Special Commissioner Avery Jones said that alternative conclusions can
be stated in a closure notice.
193.
We also considered Stephen Price v HMRC [2011] UKFTT 624(TC)
(Judge Mosedale and Mr Hughes), where the appellant had submitted that the
enquiry could be closed and an estimated assessment made. The tribunal said
that while HMRC has the power to issue such assessments:
“HMRC is entitled to know the full facts related to
a person's tax position so that they can make an informed decision whether and
what to assess. It is clearly inappropriate and a waste of everybody's time if
HMRC are forced to make assessments without knowledge of the full facts. The
statutory scheme is that HMRC are entitled to full disclosure of the relevant
facts: this is why they have a right to issue (and seek the issue of)
information notices seeking documents and information reasonably required for
the purpose of checking a tax return (see Schedule 36 of Finance Act 2008).”
Submissions on the closure
notices for 2011-12 and 2012-13
194.
Mr Onalaja relied on Jade Palace v HMRC [2006] STC
(SCD) 419, where Special Commissioner Wallace said at [46]:
“I accept the submission by Mr Maas that the Revenue
do not have to be satisfied in order to state their conclusions. If they are
not satisfied, this will be part of the conclusion; in such a case the closure
notice will go on to make a judgment as to what the correct figure should be.
Such judgment will be on the same basis as on a discovery assessment under s
29. Although it may be possible in some cases to state a figure with
confidence, for example if an identified income receipt has been omitted or if
specific expenditure is disallowed, in many cases no precision will be
possible. The measure of profits is often a matter of judgment.”
195. Mr Onalaja
said that the main issue was the loans, and as we have already recorded,
submitted that HMRC could simply close the enquiries and assess the loans as
income.
196. Mrs Naylor
submitted that there was simply too much uncertainty for HMRC to assess Mr
Mathew at the moment. Mr Straughair was not able to reconcile (a) the loans
which are currently stated to have been provided, with (b) the relevant
statutory accounts. There were also numerous unanswered questions in other
areas, such as possible capital gains and other amounts paid into Mr Mathew’s
disclosed bank account.
Decision on the closure
notices for 2011-12 and 2012-13
197. We agree
with Mrs Naylor. It is clear from the volume of information and documents
which have not yet been supplied by Mr Mathew that it would be premature to
issue a closure notice with immediate effect, which is what Mr Mathew has asked
us to do. This is not a situation where HMRC is seeking to “pursue to the
end” every line of enquiry, as in Eclipse. Neither is it one where HMRC
can simply exercise judgement as to the correct figure, as in Jade Palace, or
issue alternative assessments, as in D’Arcy. If we directed that HMRC
close the enquiry now, it would put them in the position of being “forced to
make assessments without knowledge of the full facts” as the tribunal put it in
Stephen Price.
198. We find
that the volume of information and the degree of uncertainty mean that there
are reasonable grounds for not issuing a closure notice now.
199. TMA s
28A(6) allows the Tribunal to direct that a closure notice be issued within “a
specified period.” Mrs Naylor said that if Mr Mathew fully co-operated with
the enquiry and provided all relevant information on a timely basis, that HMRC
hoped to be able to close the 2011-12 and 2012-13 enquiries in six months.
200.
Mr Mathew ended his witness statement by saying that:
“…if the Tribunal come to the conclusion that
such information is required as per the reasons given by the HMRC then I
would have no objection to provide the same as long as the HMRC provides me
with a timeframe within which such checks will be completed.”
201. Mr Mathew
has now been directed by the Tribunal to comply with the Sch 36 Notices, as
varied, within 30 days from the date of issue of this decision. However, given
the volume of information and its uncertain extent, together with the
possibility that Mr Mathew’s full compliance may open up new issues, we think
that HMRC are likely to need more than six months.
202. We are
conscious of the fact that a direction to close the enquiry is not like a
direction given under the Tribunal Rules, which can be varied on application by
the parties. A direction under TMA s 28A can only be appealed. If HMRC find
that they need more time at the end of the six month period, they would be out
of time to appeal. They would then either have to issue an assessment which
did not reflect the “proper regard for the public interest in the recovery of
the full amount of tax payable” as Lord Walker put it in Tower, or they
have to apply for permission to make a late appeal to the Upper Tribunal. If
permission were granted, the appeal process could take over a year. That would
be inefficient for both parties.
203. We
considered whether to set a longer period, but the level of uncertainty is
simply too great. As a result, we decided not to set a date by which the
enquiries must be closed. Of course, this does not give HMRC permission to
procrastinate. Mr Mathew can make another application for closure notices, and
any such applications will be considered by the tribunal in the light of any
further developments.
The closure notice
applications for the earlier years
204. Mr
Straughair has opened enquiries into the earlier years but not asked any
questions. Mr Onalaja submitted that these years were being held “in limbo”
and HMRC should either progress them or close the enquiries.
205. We
disagree. It is entirely reasonable for HMRC to decide to progress one or two
of the open enquiries and then if appropriate turn to the other years. This
makes the volume of questions proportionate and manageable for both sides. Mr
Mathew is on notice that these earlier years are under enquiry so will not be
taken by surprise if questions are asked in due course.
206. At the
moment, nothing is known about the position for these years and it would be
inappropriate to direct that they be closed forthwith. We therefore find that
there are reasonable grounds for not issuing a closure notice with immediate
effect for the years 2008-09 through to 2010-11.
207. Because of
the level of uncertainty, we also do not direct a specified period within which
the enquiries must be closed. But again, this is not an invitation to HMRC to
delay: Mr Mathew can apply again for a closure notice and may well do so if he
considers that appropriate and timely progress has not been made in moving
forward the later years so that HMRC can transfer their focus to these earlier
returns.
Full decision and appeal
rights
208. This
document contains full findings of fact and reasons for the decision.
209. There is
no right of appeal against the decision in relation to the Sch 36 Notices, see
Sch 36, para 32(5).
210. Any party
dissatisfied with the closure notice decision has a right to apply for
permission to appeal against it pursuant to Rule 39 of the Tribunal Rules.
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.
ANNE REDSTON
TRIBUNAL JUDGE
RELEASE DATE: 31 March 2015
APPENDIX
1: THE SCHEDULE 36 NOTICES
|
THE FIRST NOTICE AS
VARIED
|
|
No.
|
Item
|
|
3a
|
Schedule of any shares held by you in any entities,
both within the UK and overseas at any time during the period, other than
those provided in the letter of 9 May 2014, including (a) held by you as
nominee for someone else and (b) those held in another name where you are the
beneficial owner. The name and address of each entity must be provided,
along with the date and cost (if any) of acquisition. If any disposals have
been made, provide the date and value of sale. Also provide a statement that
Schedule is a complete and accurate list of all shareholdings beneficially
owned by you at any time during the tax year.
|
|
3b
|
Schedule of any interests in any partnership, limited
partnership, limited liability partnership or joint venture, whether in the UK or overseas at any time during the tax year, showing the name and address of the
entity, date and cost of acquisition, date and value of sale and any other
changes in your interest during the year. This Schedule must include any
such interests (a) held by you as nominee for someone else and (b) those held
in another name where you are the beneficial owner. The Schedule must be
accompanied by a statement that it contains a complete and accurate list of
all such interests beneficially owned by you at any time during the tax
year.
|
|
4a
|
Confirmation whether the loans from BBL and Noviscom
disclosed to HMRC is a complete and correct list of all loans from any entity
with which you are connected, and if not, a further Schedule of loans
received because of your position in an entity, such as a director,
shareholder, partner, employee or nominee
|
|
4b
|
An explanation of the basis on which you were loaned
money by BBL
|
|
5a
|
If any further loan account is disclosed in response
to Item 4a, a chronological breakdown with narrative description for amounts
received and details and evidence to support any repayments made on these
loans, including bank statements evidencing the payments and any repayments.
|
|
7
|
For any personal assets on which there is a charge
such as a mortgage or loan, provide the loan agreements and/or mortgage
statements which cover the whole period. Provide the bank and/or building
society books or statements from which you make these payments for the
period.
|
|
THE SECOND NOTICE
AS VARIED
|
|
2011-12
|
|
No.
|
Item
|
|
1
|
Employment and/or director contracts between you and
the companies named in Item 1 of the Second Notice issued on 13 August 2014
|
|
2
|
Loan agreements between you and (a) BBL and (b)
Noviscom
|
|
3
|
Supporting documentation for the credit balance with
BBL
|
|
4
|
Specified documentation about the disposal of the
property at Stanmore Hill, Middlesex as set out at in the Second Notice
issued on 13 August 2014
|
|
5
|
All bank and/or building society books or statements,
cheque book stubs, and deposit book counterfoils for all personal and/or
business bank accounts held in your own name or jointly
|
|
6
|
A schedule of any rental income from the property at
Stanmore Hill, including the name and address of any entity/individual
renting the property
|
|
7
|
State whether the Stanmore property was disposed of to
a connected party
|
|
8
|
Evidence for, and an explanation of, the bank receipts
in the bank account, as set out at Annex 1 to the Second Notice issued on 13
August 2014
|
|
9
|
Explanation of the opening credit balance with BBL
|
|
10
|
If there are no formal contracts between you and the
companies in Item 1, provide a list of all companies of which you were either
an employee or a director, of both, during the year.
|
|
11
|
If there are no formal loan agreements between you and
either or both of Noviscom and BBL, provide a formal statement as to whether
the loans are (a) interest bearing and (b) whether there are any arrangements
in place for repayment, together with supporting evidence for both (a) and
(b).
|
|
2012-12
|
|
1
|
Any employment/director contracts between you and the
companies listed at Item 1 of the Second Notice issued on 13 August 2014
|
|
2
|
All bank and/or building society books or statements,
cheque book stubs, and deposit book counterfoils for all personal and
business bank and/or building society accounts held in your own name or
jointly
|
|
3
|
For each loan account held with a company, provide a
detailed and chronological breakdown with narrative description for (a)
amounts received and (b) all amounts repaid. The schedule must provide
opening and closing balances, and itemise all movements during the period.
Provide details and evidence to support any repayments made to these loans
including bank statements showing the payments made.
|
|
4
|
If there are no formal contracts between you and any
one or more of the companies in Item 1, provide a list of all companies of
which you were either an employee or a director, or both, during the year.
|
|
5
|
If there are no formal loan agreements between you and
either or both of Noviscom and BBL, provide a formal statement as to whether
the loans are (a) interest bearing and (b) whether there are any arrangements
in place for repayment, together with supporting evidence for both (a) and
(b).
|
APPENDIX
2: LEGISLATION
TAXES
MANAGEMENT ACT 1970
1 Responsibility for certain taxes
The Commissioners for Her Majesty's Revenue and Customs
shall be responsible for the collection and management of—
(a) income tax,
(b) corporation tax, and
(c) capital gains tax.
12B Records to be kept for purposes of returns
(1) Any person who may be required by a notice under
section 8, 8A or 12AA of this Act to make and deliver a return for a year of
assessment or other period shall—
(a) keep all such records as may be requisite for the
purpose of enabling him to make and deliver a correct and complete return for
the year or period; and
(b) preserve those records until the end of the relevant
day, that is to say, the day mentioned in subsection (2) below or, where a
return is required by a notice given on or before that day, whichever of that
day and the following is the latest, namely—
(i) where enquiries into the return are made by an
officer of the Board, the day on which, by virtue of section 28A(1) or 28B(1)
of this Act, those enquiries are completed; and
(ii) where no enquiries into the return are so made, the
day on which such an officer no longer has power to make such enquiries.
(2) The day referred to in subsection (1) above is—
(a) in the case of a person carrying on a trade,
profession or business alone or in partnership or a company…;
(b) otherwise, the first anniversary of the 31st January
next following the year of assessment
or (in either case) such earlier day as may be specified in
writing by the Commissioners for Her Majesty's Revenue and Customs (and
different days may be specified for different cases).
(2A) Any person who—
(a) is required, by such a notice as is mentioned in
subsection (1) above given at any time after the end of the day mentioned in
subsection (2) above, to make and deliver a return for a year of assessment or
other period; and
(b) has in his possession at that time any records which
may be requisite for the purpose of enabling him to make and deliver a correct
and complete return for the year or period,
shall preserve those records until the end of the relevant
day, that is to say, the day which, if the notice had been given on or before
the day mentioned in subsection (2) above, would have been the relevant day for
the purposes of subsection (1) above.
28A Completion of enquiry into personal or trustee
return
(1) An enquiry under section 9A(1) of this Act is
completed when an officer of the Board by notice (a "closure notice")
informs the taxpayer that he has completed his enquiries and states his
conclusions.
In this section "the taxpayer" means the person to
whom notice of enquiry was given.
(2) A closure notice must either—
(a) state that in the officer's opinion no amendment of
the return is required, or
(b) make the amendments of the return required to give
effect to his conclusions.
(3) A closure notice takes effect when it is issued.
(4) The taxpayer may apply to the tribunal for a
direction requiring an officer of the Board to issue a closure notice within a
specified period.
(5) Any such application is to be subject to the
relevant provisions of Part 5 of this Act (see, in particular, section
48(2)(b)).
(6) The tribunal shall give the direction applied for
unless satisfied that there are reasonable grounds for not issuing a closure
notice within a specified period.
…
48 Application to appeals and other proceedings
(1) In the following provisions of this Part of this
Act, unless the context otherwise requires—
(a) "appeal" means any appeal under the Taxes
Acts;
(b) a reference to notice of appeal given, or to be given,
to HMRC is a reference to notice of appeal given, or to be given, under any
provision of the Taxes Acts.
(2) In the case of—
(a) an appeal other than an appeal against an
assessment, the following provisions of this Part of this Act shall, in their application
to the appeal, have effect subject to any necessary modifications, including
the omission of sections 54A to 54C and 56 below;
(b) any proceedings other than an appeal which, under
the Taxes Acts, are to be subject to the relevant provisions of this Part of
this Act, the relevant provisions—
(i) shall apply to the proceedings as they apply to
appeals;
(ii) but shall, in that application, have effect subject
to any necessary modifications, including (except in the case of applications
under section 55 below) the omission of section 56 below.
(3) In subsection (2), a reference to the relevant
provisions of this Part of this Act is a reference to the following provisions
of this Part, except sections 49A to 49I and 54A to 54C.
49 Late notice of appeal
(1) This section applies in a case where—
(a) notice of appeal may be given to HMRC, but
(b) no notice is given before the relevant time limit.
(2) Notice may be given after the relevant time limit
if—
(a) HMRC agree, or
(b) where HMRC do not agree, the tribunal gives
permission.
(3) If the following conditions are met, HMRC shall
agree to notice being given after the relevant time limit.
(4) Condition A is that the appellant has made a request
in writing to HMRC to agree to the notice being given.
(5) Condition B is that HMRC are satisfied that there
was reasonable excuse for not giving the notice before the relevant time limit.
(6) Condition C is that HMRC are satisfied that request
under subsection (4) was made without unreasonable delay after the reasonable
excuse ceased.
(7) If a request of the kind referred to in subsection
(4) is made, HMRC must notify the appellant whether or not HMRC agree to the
appellant giving notice of appeal after the relevant time limit.
(8) In this section "relevant time limit", in
relation to notice of appeal, means the time before which the notice is to be
given (but for this section).
49A Appeal: HMRC review or determination by tribunal
(1) This section applies if notice of appeal has been
given to HMRC.
(2) In such a case—
(a) the appellant may notify HMRC that the appellant
requires HMRC to review the matter in question (see section 49B),
(b) HMRC may notify the appellant of an offer to review
the matter in question (see section 49C), or
(c) the appellant may notify the appeal to the tribunal
(see section 49D)…
49B-49C …
49D Notifying appeal to the tribunal
(1) This section applies if notice of appeal has been
given to HMRC.
(2) The appellant may notify the appeal to the tribunal.
(3) If the appellant notifies the appeal to the
tribunal, the tribunal is to decide the matter in question.
50 Procedure
(1)–(5) …
(6) If, on an appeal notified to the tribunal, the
tribunal decides—
(a) that the appellant is overcharged by a
self-assessment;
(b) that any amounts contained in a partnership
statement are excessive; or
(c) that the appellant is overcharged by an assessment
other than a self-assessment,
the assessment or amounts shall be reduced accordingly, but
otherwise the assessment or statement shall stand good.
FINANCE
ACT 2008, SCHEDULE 36
1 Power to obtain information and documents from
taxpayer
(1) An officer of Revenue and Customs may by notice in
writing require a person ("the taxpayer")—
(a) to provide information, or
(b) to produce a document,
if the information or document is reasonably required by the
officer for the purpose of checking the taxpayer's tax position.
(2) In this Schedule, "taxpayer notice" means
a notice under this paragraph....
....
3. Approval etc of
taxpayer notices and third party notices
(1) An officer of Revenue and
Customs may not give a third party notice without—
(a) the agreement of the
taxpayer, or
(b) the approval of the
tribunal.
(2) An officer of Revenue and
Customs may ask for the approval of the tribunal to the giving of any taxpayer
notice or third party notice (and for the effect of obtaining such approval see
paragraphs 29, 30 and 53 (appeals against notices and offence)).
(2A) An application for approval
under this paragraph may be made without notice (except as required under
sub-paragraph (3)).
(3) The tribunal may not
approve the giving of a taxpayer notice or third party notice unless—
(a) an application for
approval is made by, or with the agreement of, an authorised officer of Revenue
and Customs,
(b) the tribunal is satisfied
that, in the circumstances, the officer giving the notice is justified in doing
so,
(c) the person to whom the
notice is to be addressed has been told that the information or documents
referred to in the notice are required and given a reasonable opportunity to
make representations to an officer of Revenue and Customs,
(d) the tribunal has been
given a summary of any representations made by that person, and
(e) in the case of a third
party notice, the taxpayer has been given a summary of the reasons why an
officer of Revenue and Customs requires the information and documents.
(4) Paragraphs (c) to (e) of
sub-paragraph (3) do not apply to the extent that the tribunal is satisfied
that taking the action specified in those paragraphs might prejudice the
assessment or collection of tax.
(5) Where the tribunal
approves the giving of a third party notice under this paragraph, it may also
disapply the requirement to name the taxpayer in the notice if it is satisfied
that the officer has reasonable grounds for believing that naming the taxpayer
might seriously prejudice the assessment or collection of tax.
….
6 Notices
(1) In this Schedule,
"information notice" means a notice under paragraph 1, 2 or 5.
(2) An information notice may
specify or describe the information or documents to be provided or produced
7. Complying with notices
(1) Where a person is
required by an information notice to provide information or produce a document,
the person must do so—
(a) within such period, and
(b) at such time, by such
means and in such form (if any),
as is reasonably specified or
described in the notice.
…
21. Taxpayer notices
following tax return
(1) Where a person has made a
tax return in respect of a chargeable period under section 8, 8A or 12AA of TMA
1970 (returns for purpose of income tax and capital gains tax), a taxpayer
notice may not be given for the purpose of checking that person's income tax
position or capital gains tax position in relation to the chargeable period.
(2) Where a person has made a
tax return in respect of a chargeable period under paragraph 3 of Schedule 18
to FA 1998 (company tax returns), a taxpayer notice may not be given for the
purpose of checking that person's corporation tax position in relation to the
chargeable period.
(3) Sub-paragraphs (1) and
(2) do not apply where, or to the extent that, any of conditions A to D is met.
(4) Condition A is that a
notice of enquiry has been given in respect of—
(a) the return, or
(b) a claim or election (or
an amendment of a claim or election) made by the person in relation to the
chargeable period in respect of the tax (or one of the taxes) to which the
return relates ("relevant tax"),
and the enquiry has not been
completed.
(5) In sub-paragraph (4),
"notice of enquiry" means a notice under—
(a) section 9A or 12AC of, or
paragraph 5 of Schedule 1A to, TMA 1970, or
(b) paragraph 24 of Schedule
18 to FA 1998.
(6) Condition B is that an
officer of Revenue and Customs has reason to suspect that, as regards the
person,—
(a) an amount that ought to
have been assessed to relevant tax for the chargeable period may not have been
assessed,
(b) an assessment to relevant
tax for the chargeable period may be or have become insufficient, or
(c) relief from relevant tax
given for the chargeable period may be or have become excessive.
(7) Condition C is that the
notice is given for the purpose of obtaining any information or document that
is also required for the purpose of checking the person's position as regards
any tax other than income tax, capital gains tax or corporation tax.
(8) Condition D is that the
notice is given for the purpose of obtaining any information or document that
is required (or also required) for the purpose of checking the person's
position as regards any deductions or repayments of tax or withholding of
income referred to in paragraph 64(2) or (2A) (PAYE etc).
(9) In this paragraph,
references to the person who made the return are only to that person in the
capacity in which the return was made.
….
29 Right to appeal against
taxpayer notice
(1) Where a taxpayer is given
a taxpayer notice, the taxpayer may appeal against the notice or any
requirement in the notice.
(2) Sub-paragraph (1) does
not apply to a requirement in a taxpayer notice to provide any information, or
produce any document, that forms part of the taxpayer's statutory records.
(3) Sub-paragraph (1) does not
apply if the tribunal approved the giving of the notice in accordance with
paragraph 3.
….
32 Procedure
(1) Notice of an appeal under
this Part of this Schedule must be given—
(a) in writing,
(b) before the end of the
period of 30 days beginning with the date on which the information notice is
given, and
(c) to the officer of Revenue
and Customs by whom the information notice was given.
(2) Notice of an appeal under
this Part of this Schedule must state the grounds of appeal.
(3) On an appeal that is
notified to the tribunal, the tribunal may—
(a) confirm the information
notice or a requirement in the information notice,
(b) vary the information
notice or such a requirement, or
(c) set aside the information
notice or such a requirement.
(4) Where the tribunal
confirms or varies the information notice or a requirement, the person to whom
the information notice was given must comply with the notice or requirement—
(a) within such period as is
specified by the tribunal, or
(b) if the tribunal does not
specify a period, within such period as is reasonably specified in writing by
an officer of Revenue and Customs following the tribunal's decision.
(5) Notwithstanding the
provisions of sections 11 and 13 of the Tribunals, Courts and Enforcement Act
2007 a decision of the tribunal on an appeal under this Part of this Schedule
is final.
(6) Subject to this
paragraph, the provisions of Part 5 of TMA 1970 relating to appeals have effect
in relation to appeals under this Part of this Schedule as they have effect in
relation to an appeal against an assessment to income tax.
….
62 Statutory records
(1) For the purposes of this
Schedule, information or a document forms part of a person's statutory records
if it is information or a document which the person is required to keep and
preserve under or by virtue of—
(a) the Taxes Acts, or
(b) any other enactment
relating to a tax,
subject to the following provisions
of this paragraph.
(2) To the extent that any
information or document that is required to be kept and preserved under or by
virtue of the Taxes Acts—
(a) does not relate to the
carrying on of a business, and
(b) is not also required to
be kept or preserved under or by virtue of any other enactment relating to a
tax,
it only forms part of a person's
statutory records to the extent that the chargeable period or periods to which
it relates has or have ended.
(3) Information and documents
cease to form part of a person's statutory records when the period for which
they are required to be preserved by the enactments mentioned in sub-paragraph
(1) has expired.
TRIBUNAL PROCEDURE (FIRST-TIER TRIBUNAL) (TAX CHAMBER)
RULES 2009
7 Failure to comply
with rules etc
(1)
An irregularity resulting from a failure to comply with any requirement in
these Rules, a practice direction or a direction does not of itself render void
the proceedings or any step taken in the proceedings.
(2) If a party has failed to
comply with a requirement in these Rules, a practice direction or a direction,
the Tribunal may take such action as it considers just, which may include--
(a) waiving the requirement…
20 Starting appeal
proceedings
(1) A person making or
notifying an appeal to the Tribunal under any enactment must start proceedings
by sending or delivering a notice of appeal to the Tribunal.
(2) The notice of appeal must
include--
(a) the name and address of
the appellant;
(b) the name and address of
the appellant's representative (if any);
(c) an address where
documents for the appellant may be sent or delivered;
(d) details of the decision
appealed against;
(e) the result the appellant
is seeking; and
(f) the grounds for making
the appeal.
(3) The appellant must provide
with the notice of appeal a copy of any written record of any decision appealed
against, and any statement of reasons for that decision, that the appellant has
or can reasonably obtain.
(4) If the notice of appeal
is provided after the end of any period specified in an enactment referred to
in paragraph (1) but the enactment provides that an appeal may be made or
notified after that period with the permission of the Tribunal--
(a) the notice of appeal must
include a request for such permission and the reason why the notice of appeal
was not provided in time; and
(b) unless the Tribunal gives
such permission, the Tribunal must not admit the appeal.
(5) When the Tribunal receives
the notice of appeal it must give notice of the proceedings to the respondent.
