Archer
| Jurisdiction | UK Non-devolved |
| Judgment Date | 08 July 2020 |
| Neutral Citation | [2020] UKFTT 288 (TC) |
| Date | 08 July 2020 |
| Court | First Tier Tribunal (Tax Chamber) |
[2020] UKFTT 288 (TC)
Judge Tracey Bowler
Validity of surcharge notices under TMA 1970,s. 59C – Notice not sent to taxpayer, was replacement valid – Yes – Was notice of additional first surcharge valid – Yes – Whether judicial review of bankruptcy threat where closure notices claimed to be invalid gave rise to reasonable excuse and if so was there unreasonable delay after excuse ceased.
[1] In 2016 HMRC issued closure notices to Mr Archer in respect of disputed tax liabilities relating to the tax years 2001–2002 and 2002–2003 (the “Closure Notices”), but Mr Archer considered that the closure notices were not valid and therefore made no payment and did not appeal the notices. HMRC warned that bankruptcy proceedings would be started to recover a debt resulting from the closure notices in excess of £22.5 million. Mr Archer commenced judicial review proceedings, challenging the ability of HMRC to threaten bankruptcy on the basis of what Mr Archer claimed were invalid closure notices. His application was dismissed by the High Court and his appeal of that decision was dismissed by the Court of Appeal. An application for permission to appeal to the Supreme Court was refused by it. Seven days after the Supreme Court's decision Mr Archer paid the underlying amount of tax.
[2] During the judicial review proceedings HMRC issued surcharge notices under section 59C of the Taxes Management Act 1970 (“TMA”) for amounts totalling £1,403,181.78. Mr Archer contends that not all of the surcharge notices were validly issued. HMRC has conceded that is correct as regards some of the notices, but not others. HMRC sent Mr Archer a manually created set of second surcharge notices after it became apparent that Mr Archer had not received some of those originally created by the computer system. HMRC also sent Mr Archer an additional first surcharge notice in respect of an adjustment to his liability for 2001–2002. Mr Archer argues that the manually issued and additional surcharge notices were not validly issued. In relation to all of the surcharges, Mr Archer contends that he has a reasonable excuse for the late payment of the unpaid tax as a result of the judicial review proceedings, an undertaking provided by HMRC and HMRC's entries in his on-line self-assessment account.
[3] As a result of an internet provider's broadband provision problems on the day of the hearing Mr Archer's solicitor, Ms Susie Moore, was unable to participate in the hearing. However, she asked that the hearing should continue in her absence given the presence of one of her colleagues and Mr McDonnell. In those circumstances I decided that it was just and fair to proceed in Ms Moore's absence.
[4] Mr Archer appeals against:
- The notices of surcharge issued by HMRC under section 59C TMA on 10 May 2016 in the amounts of £360,588.11 for the tax year 2001–2002 and £339,256.54 for the tax year 2002–2003 (the First Surcharge Notices);
- The notices of surcharge dated on or about 5 October 2018 ( the Second Surcharge Notices) imposing surcharges in the amounts of £362,334.35 for the tax year 2001–2002 and £339,256.54 for the tax year 2002–2003;
- The notices of surcharge dated 8 February 2019 (the February Notices) imposing surcharges in the amounts of £362,334.35 for the tax year 2001–2002 and £339,256.54 for the tax year 2002–2003; and
- The notice of surcharge dated 8 February 2019 in the amount of £1,746.24 on an additional amount of unpaid tax in the year 2001–2002 (the Additional Surcharge Notice).
[5] It is not disputed that the appeals have been validly made.
[6] In summary, Mr Archer appealed on the following grounds:
- that he had a reasonable excuse for the non-payment of tax for the tax years 2001– 2002 and 2002–2003 (the Relevant Years) as a result of the judicial review litigation concerning the very existence of an obligation to pay and:that reasonable excuse continued from 3 February 2016 until actual payment on 22 June 2018; orif the reasonable excuse ceased prior to 22 June 2018, he made payment without unreasonable delay after the excuse had ceased; orhe made payment within such further time as the Commissioners may have allowed within the meaning of s.118(2) TMA 1970, in light of the undertaking given by HMRC's solicitor on 7 December 2017;
- in addition, in relation to the Second Surcharges that:the Second Surcharge Notices were never served on Mr Archer or his agent and therefore the second surcharges were not validly imposed;the manual February Notices subsequently sent to Mr Archer had no statutory effect as notices as HMRC cannot validly issue the same notice more than once, or are otherwise not validly issued as HMRC maintained that the Second Surcharge Notices had been issued on 5 October 2018; and
- in relation to the Additional Surcharge, that HMRC cannot validly issue more than one surcharge notice in respect of the same period and the same matters.
[7] At the hearing Mr McDonnell confirmed that it was no longer being argued that section 118(2) had been applied to mean that the tax liability for the Relevant Years was not due and payable until after the Supreme Court refusal of permission to appeal. The amount of tax had remained due and payable, but the undertaking given by HMRC not to pursue the debt was part of the reasonable excuse for the late payment of the tax.
[8] Mr McDonnell also confirmed that Mr Archer was not seeking to claim that under section 59C(5) TMA the surcharges must be imposed by an officer of HMRC rather than by an automated process involving a computer.
[9] The evidence consisted of ebundles as listed in an electronic copy of the index, as well as an email sent to me by Mr Shea on the day of the hearing. I address the admission of the evidence in the email later in this decision.
[10] There was no oral evidence. Mr Archer did not attend the hearing and did not provide evidence in a Witness Statement other than the Witness Statement included in the ebundle which was dated 29 March 2016 and which had been prepared for the judicial review litigation and which was not updated or adopted at the hearing before me.
[11] The parties have not agreed a statement of facts, although Mr McDonnell and Mr Shea agreed that the chronologies set out in the skeleton arguments were accepted. These chronologies are reflected in this section of my decision. In addition, Mr Archer is seeking to rely on statements made in the courts' decisions in his judicial review proceedings. I have decided that details of the decisions should therefore be set out by me. I start by setting out the background to the Closure Notices before addressing the judicial review proceedings. I then set out how the surcharges have arisen and what was shown on Mr Archer's self- assessment account at relevant times.
[12] On 18 July 2003 HMRC opened an enquiry under section 9A TMA into Mr Archer's tax return for the tax year 2001– 2002. On 30 June 2004 HMRC opened an enquiry under section 9A TMA into Mr Archer's tax return for the tax year 2002–2003. The enquiries concerned the use of two marketed tax mitigation schemes, one known as the Relevant Discounted Securities scheme (“RDS”) and the other relating to the surrender of certain second-hand life assurance policies and known as “SHIPS”.
[13] In 2009 the Court of Appeal decided that neither RDS nor SHIPS worked.
[14] On 30 October 2015 and 15 January 2016 HMRC issued Follower Notices (“FNs”) and Accelerated Payment Notices (“APNs”) to Mr Archer in respect of the tax years 2001–2002 and 2002–2003 in relation to the tax schemes. The APNs did not give rise to any debt due and payable by Mr Archer, because KPMG made statutory representations in relation to them on 27 January 2016, and HMRC did not respond. Accordingly, they have been in abeyance under section 223 (5) (b) of the Finance Act 2014.
[15] In December 2015 and January 2016 KPMG on behalf of Mr Archer made applications to the First-tier Tribunal (“FTT”) pursuant to section 28A(4) of the TMA for directions that HMRC be required to issue Closure Notices in respect of their enquiries into both tax returns. On 2 February 2016, prior to a hearing of that application HMRC issued the Closure Notices under s28A TMA 1970 (dated 3 February 2016).
[16] The time period in which Mr Archer could appeal the Closure Notices expired on 3 March 2016. On 2 March 2016, KPMG notified HMRC that the Closure Notices did not make any amendments to his self-assessments for the years in question. It is accepted by both parties that the closure notices did not state an amount of tax due. KPMG explained that in their view the closure notices did not create a payment obligation under s59B TMA70 and there was no date for payment under para 5 Sch3ZA, TMA 1970. As a result the original self-assessment stood and there was nothing to appeal as the Closure Notices did not over-charge Mr Archer. This formed the core of the argument for the judicial review proceedings which followed in relation to later threatened bankruptcy action by HMRC.
[17] In a letter dated 10 March 2016 (but emailed to KPMG on 9 March) HMRC set out the basis on which it was maintained that the Closures Notices were valid. It was noted that Mr Archer had not appealed the Closure Notices and that HMRC would commence any appropriate enforcement proceedings in due course.
[18] On 11 March 2016 HMRC's debt management team (“DMB”) issued a letter to Mr Archer warning of bankruptcy proceedings if action to pay a debt of £22,541,746.48 of unpaid tax was not taken within seven working days. Discussions via email and telephone ensued between KPMG and HMRC. On 18 March 2016 HMRC confirmed that the DMB were instructed to issue the bankruptcy letter when the Closure Notices were not appealed. On 22 March 2016 HMRC said that there were other closure notices relating to other tax years for...
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Archer v R & C Commissioners
...1970, s. 59C. The Upper Tribunal (UT) set aside and remade the First-tier Tribunal (FTT) decision on late payment surcharges in Archer [2020] TC 07772. The overall result was unchanged, with the UT deciding that related judicial review claims had not provided the taxpayer with a reasonable ......