(1)Kit Cheung Lee (2)Rui Yun Lee (3)Golden Pool (Cambourne) Ltd v Her Majesty's Revenue & Customs, SPC 00715

JurisdictionUK Non-devolved
JudgeCharles HELLIER
Judgment Date07 November 2008
RespondentHer Majesty's Revenue & Customs
Appellant(1)Kit Cheung Lee (2)Rui Yun Lee (3)Golden Pool (Cambourne) Ltd
ReferenceSPC 00715
CourtSpecial Commissioners (UK)
Spc00715







Income tax and corporation tax – self-assessment – enquiry into return – section 28A Taxes Management Act 1970 - scope of power to direct that an enquiry be closed – whether power should be exercised – decision on own facts




THE SPECIAL COMMISSIONERS


(1) KIT CHEUNG LEE

(2) RUI YUN LEE

(3) GOLDEN POOL (CAMBOURNE) LTD Appellants



  • and –



THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS Respondents





Special Commissioner: DR DAVID WILLIAMS



Sitting in public in London on 30 October 2008


Michael Feng, accountant, for the Appellants


Mike Faulkner and Jenny Langley, officers of Revenue and Customs, for the Respondents




© CROWN COPYRIGHT 2008



DECISION


1 There are three linked sets of applications before me. They relate to Mrs Lee, her husband, and a company of which I am told she is the only shareholder. I am asked to require the closure of all current enquiries being made by Her Majesty’s Revenue and Customs (“HMRC”) in respect of each of taxpayers for each of the relevant tax years from 1998 to 2007. The applications are made under section 28A of the Taxes Management Act 1970 (“TMA”) in respect of Mrs and Mr Lee and under the equivalent provision for corporation tax (paragraph 33 of Schedule 18 to the Finance Act 1998 (“Schedule 18”)) for the company. Most of these applications are misconceived. Before I deal with the one application that I find properly made, I must strip away the matters outside the scope of my powers.

Enquiries: the law

2 All individual taxpayers are required, if asked to do so, to complete self-assessment tax returns for any tax year in accordance with section 8 TMA. An officer of Revenue and Customs (“Officer”) may, under section 9A TMA, start an enquiry into any self-assessment income tax return submitted to HMRC by a taxpayer. (The directly equivalent power for corporation tax and companies is in Schedule 18, paragraph 32. I refer only to the income tax provisions below, as those for corporation tax are direct equivalents and are in Schedule 18).


3 An Officer wishing to conduct an enquiry into a self-assessment tax return must give notice to the taxpayer that he or she intends to do this. He or she can give notice only within a “window” of time allowed by section 9A(2) TMA. There are no preconditions that the Officer must meet when deciding to make an enquiry. But it must be an enquiry into a return. Notice cannot be given before a return is made. And it must be given within the time allowed. Once the “window” has passed, an Officer may investigate a taxpayer’s affairs only by using other powers such as those in section 29 TMA. In this decision I refer to an enquiry under section 9A or its corporation tax equivalent as an “enquiry”. I refer to any other form of enquiry or investigation as an “investigation”.


4 There is no set form provided in law for a section 9A notice. It is required only that the notice is in writing to the taxpayer and that it meets the legislative requirements noted above. In my judgment section 9A(1) requires that the notice indicate clearly that the Officer is giving notice of his or her “intention to” “enquire into” one or more returns. No precise words have to be used, but that intention must be clear. While it may be best practice always to refer specifically to section 9A (or the corporation tax equivalent) and to the specific return to be the subject of enquiry, that is not necessary in law. But entirely general language in a letter may not be adequate notice engaging section 9A. In particular, an indication of relevant dates is needed because section 9A(2) provides a specific “window” with regard to any return. The section expressly provides for a limited time in which an enquiry may be started. And it does not empower a general investigation into a taxpayer’s affairs. The consequence to HMRC, if proper language is not used in a section 9A notice, is that HMRC may later have to establish that the far stricter requirements of section 29 TMA are met.


5 An enquiry, once notified continues until an Officer gives the taxpayer notice closing the enquiry. No time limit is set for the time that an Officer may spend on an enquiry. If a taxpayer considers...

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