Benson
| Jurisdiction | UK Non-devolved |
| Judgment Date | 25 September 2017 |
| Neutral Citation | [2017] UKFTT 707 (TC) |
| Date | 25 September 2017 |
| Court | First Tier Tribunal (Tax Chamber) |
[2017] UKFTT 0707 (TC)
Judge Peter Kempster, Mr Ian Menzies-Conacher FCA
The applicant appeared in person
Ms Sadiya Choudhury of counsel, instructed by the General Counsel and Solicitor to HM Revenue & Customs, appeared for the respondents
Income tax – Closure notice application – TMA 1970, s. 28A(4) – Enquiry open for over six years – Information notice issued after request for closure notice made – Whether HMRC acted unreasonably – Whether closure should be ordered.
[1] By an application filed on 21 March 2017 Mr Benson requested a Tribunal direction requiring HMRC to issue closure notices in relation to open enquiries into his self-assessment tax returns for the tax years 2008–09 and 2009–10 (“the Application”).
[2] Section 28A Taxes Management Act 1970 provides:
(1) An enquiry under section 9A(1) or 12ZM 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–
- state that in the officer's opinion no amendment of the return is required, or
- 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.
[3] Mr Benson filed his 2008–09 self-assessment return electronically on 27 January 2010. It included a “white space” entry disclosing information concerning his participation in certain tax planning structures, discussed further below. HMRC opened an enquiry into the return (s 9A TMA 1970 refers) on 9 December 2010, and on the same date requested certain documents and information from Mr Benson's advisers, Montpelier Tax Consultants (Isle of Man) Limited and Montpelier (Trust and Corporate) Services Limited (“Montpelier”). On 18 February 2011 Montpelier supplied information to HMRC.
[4] Mr Benson filed his 2009–10 self-assessment return electronically on 2 November 2010. It also included a white space entry. HMRC opened an enquiry into the return on 12 October 2011, and on the same date wrote to Montpelier stating, “As you will be aware a similar check is currently being undertaken into your client's self-assessment tax return for the year ended 5 April 2009. As a substantial amount of information has already been provided in respect of this year I do not, at this stage, intend asking for the same information which relates to the year ended 5 April 2010.”
[5] On 14 October 2016 HMRC wrote a precursor letter to Mr Benson and Montpelier stating that HMRC intended to issue follower notices and accelerated payment notices (Part 4 Finance Act 2014 refers) to Mr Benson concerning his participation in tax avoidance schemes in the tax years 2006–07 and 2007–08. On 28 October 2016 HMRC issued the follower notices and accelerated payment notices. On 27 October and 1 November 2016 Montpelier replied stating that they were not Mr Benson's tax agent.
[6] On 11 February 2017 Mr Benson wrote to HMRC stating that it was now many years since the enquiries were opened, and requesting that closure notices be issued for both years “so that the matter can be closed or the appeals process can be progressed.” On 20 February 2017 Mr Benson resent that letter by email (redating the letter as 20 February), explaining that he was unsure to which person at HMRC the request should be sent.
[7] On 21 March 2017 Mr Benson filed the Application with the Tribunal (applying for closure notices for both years).
[8] On 22 March 2017 HMRC replied to Mr Benson, stating:
Thank you for your email dated 20 February 2017. I am sorry that you have not received any details regarding the enquiries into your Self-Assessment Returns for the tax years ending 5 April 2009 & 2010.
Your case has been dealt with by other teams in HMRC in the past. My team have taken over responsibility for the enquiries into your Returns therefore if you have any further queries please do not hesitate to contact me or my team on the telephone number above.
Having reviewed your case, at this moment, I am not in a position to provide you with Closure Notices as the enquiry work has not been fully completed. To enable HMRC to progress our enquiries please provide the following documents:
For the tax year ending 5 April 2009, please send me the following details:
- A copy of your consultancy agreement with Rathowen Ltd.
- Copies of all bank statements for the period 6 April 2008 to 5 April 2009 demonstrating Rathowen's payment of Consultancy fees.
- On review of the information provided, I note that the letter from Rathowen Ltd dated 22 August 2008 addressed to you refers to The Fernleigh Employee Benefit Trust. Please provide information and/or records regarding this trust, including how it operates and any promotional material you received from it.
- Information regarding the sub-fund in your name (The David Allen Benson Sub Fund). Among other, please provide details on how it was set up, how the balance of the sub-fund is calculated, how the money is transmitted to you and what is the interaction with Fernleigh Employee Benefit Trust. Please provide any supporting documentation regarding that.
- Details of the end client. As part of your consultancy agreement with Rathowen Ltd, who did you provide your services to? How did you arrange to provide your services to them? Please provide any supporting documentation.
For the tax year ending 5 April 2010, please send me the following details:
- A copy of your consultancy agreement with Rathowen Ltd (if different from above).
- Copies of all bank statements for the period 6 April 2009 to 5 April 2010 demonstrating Rathowen's payment of Consultancy fees.
- Information and/or records regarding The Fernleigh Employee Benefit Trust (if different from above).
- Details of the end client. As part of your consultancy agreement with Rathowen Ltd, who did you provide your services to? How did you arrange to provide your services to them? Please provide any supporting documentation.
- Copy of the loan agreement with Ronsard Ltd
From examining the information we currently have at hand, my position so far is that the amounts you have received from Ronsard Limited that were described as “loans” during the years in question may form part of your taxable income. This is because it appears to be disguised remuneration. The government is introducing the 2019 Loan Charge to tackle disguised remuneration arrangements. The loan charge will be on the cumulative balance of any unpaid loans received that have not previously been taxed; this may include any accrued interest, of all such loans that you have received under the loan arrangements.
A number of people like you, who used Ronsard and similar schemes have already settled their tax affairs and others are talking to us about settling. The benefits to you in settling now include gaining certainty over your tax affairs and concluding our investigation into the tax years ending 5 April 2009 & 2010.
Although HMRC cannot advise you whether or not you should enter into any settlement, you may wish to take professional advice. If you have an agent who assists you with your tax affairs, that firm should be aware that we have written to you, and you should show them a copy of this letter.
I would be grateful if you could provide the information requested by 2 May 2017. …
[9] On 28 March 2017 Mr Benson replied:
It is clear from your comments in [your letter] that you are in possession of the substantial pack of documentation that was provided to you shortly after the enquiries were originally opened. You have had ample time (in fact, many years) to consider those documents but have not progressed my case in the slightest, nor in fact communicated at all with me on the matter.
Also, as you are no doubt aware, there are statutory time-limits laid down for the keeping of historical records. Those...
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