Beadle v Revenue and Customs Commissioners

JurisdictionUK Non-devolved
Judgment Date01 April 2019
Neutral Citation[2019] UKUT 101 (TCC)
Date01 April 2019
CourtUpper Tribunal (Tax and Chancery Chamber)

[2019] UKUT 101 (TCC)

Upper Tribunal (Tax and Chancery Chamber)

The Hon Mr Justice Arnold and Judge Jonathan Cannan

Beadle
and
Revenue and Customs Commissioners

Keith Gordon and Ximena Montes Manzano, instructed by Jeffries Law LLP, appeared for the appellant

Aparna Nathan QC, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents

Partner payment notices (PPN) – Penalty for late payment – Jurisdiction of FTT on appeal against penalty notice to entertain challenge to PPN – Whether reasonable excuse – Whether special circumstances – Whether penalty notices invalid due to incorrect statement of date on which PPN due or due to failure to identify issuing officer – Applicability of TMA 1970, s. 114(1) – FA 2014, s. 226 and Sch. 32 – FA 2009, Sch. 56, para. 9, 11 and 16 – Appeal dismissed.

The Upper Tribunal (UT) upheld two First-tier Tribunal (FTT) decisions on penalties for the late payment of a partner payment notice (PPN), in Beadle [2017] TC 05993 and Beadle [2018] TC 06224. The UT agreed that: in an appeal against a penalty notice for non-payment of a PPN the FTT could not consider a challenge to the underlying PPN; there was no reasonable excuse for the non-payment of the PPN; there were no special circumstances justifying a reduction in the penalty; and the penalty notice was valid.

Summary

Mr Beadle (the appellant) was a participant in a marketed tax avoidance scheme. Under the scheme he claimed to carry back his share of a partnership's purported trading loss to obtain a repayment of income tax of an earlier year. HMRC enquired into the partnership's tax return and subsequently issued a closure notice reducing the partnership's trading loss to nil. HMRC served a PPN on the appellant requiring a payment in relation to his involvement in the scheme. The appellant made representations against the validity of the PPN, but these were rejected and HMRC confirmed the PPN.

As the appellant failed to pay the sum due on time HMRC issued a 5% non-payment penalty under FA 2014, s. 226(2). The appellant appealed the penalty on the ground that he had a reasonable excuse for the late payment. After HMRC rejected his appeal, he appealed to the FTT.

In Beadle [2017] TC 05993, Judge Jonathan Richards held that the FTT did not have jurisdiction when considering an appeal against a penalty notice for non-payment of a PPN to entertain challenges to the underlying PPN.

In Beadle [2018] TC 06224, Judge Rupert Jones held that the appellant did not have a reasonable excuse for late payment of the PPN, nor were there special circumstances to justify a reduction in the penalty. He also rejected challenges to the validity of the penalty notice.

The appellant appealed against both FTT decisions. The UT dismissed the appeal.

The UT agreed with Judge Richards that the FTT had no jurisdiction to entertain the appellant's challenge to the PPN, because:

  • Although the UT accepted that authorities established the exception or limit to the exception to the exclusivity principle (where a public body brings enforcement action of some kind against a person in a court or tribunal and that person seeks to defend himself or herself by means of a challenge either to the enforcement decision itself or to some antecedent decision of that public body on public law grounds unless the relevant statutory scheme excludes such a challenge) it did not accept that the availability of a defence to enforcement action on public law grounds could only be excluded by express statutory language. In the UT's judgment, the availability of such a defence could also be excluded by necessary implication from the statutory scheme.
  • The statutory scheme concerning PPNs and penalty notices did by necessary implication exclude the possibility of a challenge by the taxpayer to a PPN on public law grounds in the context of an appeal to the FTT against a penalty notice because:Parliament had provided rights of appeal against the underlying tax assessment and against a penalty notice, but not against a PPN. In the case of a PPN, Parliament had only provided a right to make representations which HMRC are required to consider. In the UT's view, the absence of a right of appeal against PPNs is a clear indication that Parliament did not intend taxpayers to be able to challenge PPNs on appeal to the FTT. If taxpayers could not do so directly, then it would be very odd to permit them to do so indirectly by way of an appeal against a penalty; andpermitting such a challenge would be contrary to the design and purpose of the PPN regime.

The appellant contended that when considering the issue of reasonable excuse pursuant to FA 2009, Sch. 56, para. 16 and special circumstances in para. 9, Judge Jones had wrongly not made any determination as to whether the appellant's subjective belief, that the tax to which he was assessed was not payable and therefore the PPN unlawful, was reasonable.

The UT agreed with Judge Jones that there was no need to make such a determination because, as Judge Jones explained:

  • even if the appellant had a reasonable belief that he was not liable to pay the understated partner tax liability, this could not form a reasonable excuse for the failure to pay the PPN within the payment period;
  • applying the test in Clean Car Co Ltd [1991] BVC 568, a reasonable taxpayer in the appellant's position would have paid the sum under the PPN within the payment period and made whatever challenges to the underlying liability he or she chose to do in the mean-time; and
  • the appellant's reasoning, if accepted, would permit any taxpayer to circumvent the evident intention of Parliament as to who should hold the tax pending the final determination of the tax liability by allowing taxpayers to institute multiple proceedings.

For the same reasons HMRC's view that the appellant's circumstances did not constitute special circumstances was not flawed.

The UT rejected the appellant's contentions that the penalty notice was invalid.

Regarding the possible incorrect date being used in the penalty notice for the payment of the PPN, the UT held that the penalty notice complied with the assessment requirements in FA 2009, Sch. 56, para. 11(1)(c) and even if it did not, it agreed with Judge Jones that the mistake as to the date on which the period of lateness started was covered by TMA 1970, s. 114(1).

Regarding the penalty notice not identifying the issuing officer, but simply identifying the relevant HMRC team, it was accepted by the parties that there was no requirement in TMA 1970, s. 30A to name the issuing officer. The UT rejected the appellant's argument that, because s. 31A(1)(a) required notice of an appeal to be given to the officer who gave the notice of assessment, it was implicit that the penalty notice had to identify the issuing officer. Where, as here, a notice did not identify an individual officer, but identified a team of officers, then the UT considered that notice of appeal could be given to that team.

Comment

This UT decision provides that when the FTT considers an appeal against a penalty notice for non-payment of a PPN the FTT cannot consider a challenge to the underlying PPN.

The legislation provides that a taxpayer has a right of appeal against the underlying tax assessment and against a penalty notice, but not against the PPN, against which a taxpayer only has a right to make representations which HMRC are required to consider.

DECISION
Introduction

[1] This is an appeal from two decisions of the First-Tier Tribunal (Tax): one by Judge Jonathan Richards dated 5 July 2017 [2017] TC 05993 and one by Judge Rupert Jones dated 17 November 2017 [2018] TC 06224. In the first decision Judge Richards held that the FTT did not have jurisdiction when considering an appeal against a penalty notice for non-payment of a Partner Payment Notice (“PPN”) to entertain challenges to the underlying PPN. In the second decision Judge Jones held that the Appellant did not have a reasonable excuse for late payment of the PPN, nor were there special circumstances. He also rejected certain challenges to the validity of the penalty notice.

The facts

[2] There is no dispute as to the facts, which can be summarised as follows.

[3] The Appellant was a participant in a marketed tax avoidance scheme involving a partnership called Ingenious Film Partners LLP (“the Partnership”) in the year ending 5 April 2005. The Partnership entered into arrangements (which were “DOTAS arrangements” for the purposes of section 219(5) Finance Act 2014 (“FA 2014”)) by which it was claimed that a trading loss was realised for that year. The Appellant claimed to carry back his share of that loss to reduce his taxable income for the tax year 2001–02 and obtained relief by way of repayment of approximately £100k calculated by reference to tax originally paid for the 2001–02 tax year.

[4] HMRC opened an enquiry into the Partnership's tax return for, among others, the tax year 2004–05. On 30 November 2012 HMRC issued the Partnership with a closure notice reducing the Partnership's trading loss to nil. There is an appeal against the closure notice.

[5] On 3 October 2014 HMRC sent the Appellant a letter informing him that he would soon be receiving a PPN in relation to his involvement in the Partnership scheme in the 2004–05 tax year. The letter enclosed an information sheet entitled “CC/FS24 – Tax avoidance schemes – accelerated payments” which set out the consequences of non-payment of the PPN.

[6] On 17 October 2014 HMRC issued the Appellant with the PPN. That notice required the Appellant to pay the sum of £100,054.80.

[7] HMRC sent the Appellant a letter reminding him of the deadline for payment of the sum due pursuant to the PPN on 5 December 2014. This letter also stated that late payment would result in additional amounts being due.

[8] By letter dated 5 January 2015 the Appellant made representations against the validity of the PPN on the basis that...

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6 cases
  • R & C Commissioners v Goldsmith
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    ...(t/a Orchards Residential Home) v R & C Commrs [2017] BTC 511, PML Accounting Ltd v R & C Commrs [2017] BTC 10 and Beadle v R & C Commrs [2019] BTC 512 applied to this appeal. The UT concluded that the FTT did have jurisdiction to consider the purposes for which a notice to file was given a......
  • David Beadle v The Commissioners for HM Revenue and Customs
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    • Upper Tribunal (Tax and Chancery Chamber)
    • 1 April 2019
    ...[2019] UKUT 0101 (TCC) Appeal numbers UT/2018/14, 15 Partner Payment Notices – penalty for late payment – jurisdiction of FTT on appeal against penalty notice to entertain challenge to PPN – whether reasonable excuse – whether special circumstances – whether penalty notices invalid due to i......
  • The Commissioners for HM Revenue and Customs v David Goldsmith
    • United Kingdom
    • Upper Tribunal (Tax and Chancery Chamber)
    • 4 November 2019
    ...3 May 2018) (“Woodgate”). This case was cited with approval by the Upper Tribunal (Arnold J and Judge Cannan) in Beadle v HMRC [2019] UKUT 101 (TCC). In Woodgate the defendant applied to set aside a judgment in default which HMRC had obtained in respect of the sums specified in one two PPNs......
  • Revenue and Customs Commissioners v Rogers and another
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    ...under paragraph 17A of Schedule 55). That, in turn, she argued made the situation analogous to that considered in Beadle v R & C Commrs [2019] BTC 512 in the context of accelerated payment notices. Accordingly, Parliament's decision not to give a statutory right of appeal against a s8 notic......
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