Billingham (Inspector of Taxes) v Myers
| Jurisdiction | England & Wales |
| Judgment Date | 21 November 1994 |
| Date | 21 November 1994 |
| Court | Chancery Division |
Chancery Division.
Knox J.
Timothy Brennan (instructed by the Solicitor of Inland Revenue) for the Crown.
Kevin Prosser (instructed by Berwin Leighton) for the taxpayer.
The following cases were referred to in the judgment:
R v General Commrs for Holborn, ex parte Rind Settlement TrusteesTAX(1974) 49 TC 656
Knight v IR Commrs TAX(1974) 49 TC 179
Thurgood v Slarke (HMIT) TAX(1971) 47 TC 130
Capital gains tax - Default interest - Return made late - Assessment made for the purpose of making good loss of tax to the Crown - Assessment appealed - Postponement of part of tax assessed granted after date when tax was due - Whether admitted neglect caused loss of tax to the Crown - Whether default interest payable - Taxes Management Act 1970 section 88 subsec-or-para (1)Taxes Management Act 1970, s. 88(1)(5)(d), Capital Gains Tax Act 1979 section 7Capital Gains Tax Act 1979, s. 7 (Taxation of Chargeable Gains Act 1992 section 7Taxation of Chargeable Gains Act 1992, s. 7).
This was an appeal by the Revenue against a decision of the general commissioners for Hampstead that default interest was not payable under the Taxes Management Act 1970, Taxes Management Act 1970 section 88 subsec-or-para (1)s. 88(1) where a successful application for postponement had been made.
On 1 November 1988 the taxpayer's accountants sent a completed return for the year 1988-89 to the Inspector which reached him on 3 November. The return had been issued on 6 April 1988. On 2 November the accountants had telephoned the taxpayer's PAYE district to notify them that capital gains of £3m had been realised in the relevant year of assessment.
On 7 November 1988 an assessment on capital gains of £3m was issued to the taxpayer charging £898,020 tax. On 6 December the accountants appealed against the assessment claiming hold-over election on gifts into settlement under the Finance Act 1981, Finance Act 1981 section 78s. 78. The accountants applied for postponement of £675,390, which was agreed by the inspector on 23 December, leaving £222,630 payable which was paid on 18 January 1989.
In 1990 a decision was made not to claim hold-over relief and the appeal was settled by agreement under the Taxes Management Act 1970,Taxes Management Act 1970 section 54s. 54 on 16 March 1992. The £222,630 was paid on 18 January 1989.
On 19 March 1991 the inspector advised the accountants that the assessment of 7 November 1988 was raised on the basis of information supplied late and consequently interest would be sought under the Taxes Management Act 1970, Taxes Management Act 1970 section 88s. 88, in order to make good a loss of tax to the Crown, to run from 1 December 1988, the date on which the tax would have been due if the return had not been received late and the inspector had been able to issue the assessment 30 days before 1 December.
By the Capital Gains Tax Act 1979, Capital Gains Tax Act 1979 section 7s. 7 tax was payable on 1 December next following the end of the relevant tax year or at the expiration of 30 days beginning with the date of the issue of the notice of assessment, whichever is the later.
Interest became payable on tax assessed for the purpose of making good a loss of tax to the Crown due to the taxpayer's neglect under the Taxes Management Act 1970, Taxes Management Act 1970 section 88 subsec-or-para (5)s. 88(5)(d) from the date on which the tax ought to have been paid, 1 December 1988.
The general commissioners determined that the £222,630 should have been paid on 1 December 1988, making a finding of neglect against the taxpayer. Accordingly interest on that amount ran from 1 December 1988 under the Taxes Management Act 1970, Taxes Management Act 1970 section 88s. 88. However, they determined that interest on the balance, in respect of which postponement had been granted, was payable from 1 June 1989 under the Taxes Management Act 1970, Taxes Management Act 1970 section 86s. 86.
The taxpayer accepted that a delay in paying tax might amount to a loss of tax to the Crown but contended that it had to be shown that there was actually a loss to the Crown and that a causal connection had to be shown between the neglect and the loss of tax. The taxpayer accepted that the return was late, that therefore the assessment was made too late for the taxpayer to pay the tax on the due date. However, the Revenue had allowed a postponement of tax. There was no reason to suppose that such a postponement would not have been allowed had the return been in time, and the tax would not then have been payable on 1 December 1988.
The question was whether it was legitimate to have regard to events subsequent to the date of the assessment in order to determine whether there had in fact been a loss of tax to the Crown which it was the purpose of the assessment to make good. The Revenue argued that the grant of postponement, occurring after the date of the assessment, could not affect the consequences flowing from the assessment. At the time of the assessment all the requirements for the application of the Taxes Management Act 1970, Taxes Management Act 1970 section 88s. 88 were present: there was neglect and there was a loss of tax consequent on the late return in that the assessment could not have been made in time for payment to be made by the due date.
Held, dismissing the Revenue's appeal:
Either all or none of events subsequent to the date of the assessment should be excluded from consideration in deciding whether there had been a loss to the Crown. Given that the assessment was made before any tax could have been due, it must be permissible to look forward to events occurring after the making of the assessment. That being so, there was no reason why some facts, such as the non-payment of tax by the taxpayer on or before 1 December 1988, and not other facts, such as the application for postponement and its grant on 23 December 1988, should be taken into account. Having regard to events in December 1988, on a balance of probabilities, an application to postpone, if made consequent on a return made in due time, would have been granted in any event. Accordingly no loss to the Crown arose as a result of the late return.
1. At a meeting of the commissioners for the general purposes of income tax for the Division of Hampstead in the County of Greater London held on 21 July 1992, Mr Martin Trevor Myers ("the taxpayer") appealed against a determination made on 10 March 1992 by the inspector of taxes London Provincial 8 District with regard to interest underTaxes Management Act 1970 section 88s. 88 of theTaxes Management Act 1970 on a capital gains tax assessment for the year ending 5 April 1988.
2. Shortly stated, the question for determination was whether or not the said assessment had been made for the purpose of making good to the Crown a loss of tax wholly or partly attributable to the taxpayer's neglect and accordingly whether or not the said determination was correct.
3. [Paragraph 3 and 4 listed the witnesses who gave evidence and the documents proved or admitted before the commissioners.]
5. We found the following facts (all of which, with the exception of subpara. 5(a), (b), (e) and (1) are based on a statement of facts agreed between the parties, with grammatical or wording changes):
(a) The taxpayer's tax return for 1988-89 was issued to him by the Leeds Underwriters Unit on 6 April 1988.
(b) The taxpayer signed his tax return for 1988-89 on 29 October 1988.
(c) On 1 November 1988, Levy Gee sent the taxpayer's 1988-89 tax return which included a capital gains tax computation to the Leeds Underwriters Unit.
(d) On 2 November 1988, Levy Gee telephoned the taxpayer's PAYE District, London Provincial 5 District (the office responsible for sending out his capital gains tax assessments), to inform them of the capital gain arising for the year ended 5 April 1988 and suggested a capital gains tax assessment be raised of £3m based on the computation submitted.
(e) Levy Gee's letter of 1 November 1988 with its enclosures was received by the Leeds Underwriters Unit on 3 November 1988.
(f) On 7 November 1988, London Provincial 5 District issued a capital gains tax assessment on the taxpayer for 1988-89 on gains of £3m with tax payable of £898,020.
(g) On 6 December 1988, Levy Gee appealed against the assessment on the basis that part of the gain could be held over under Finance Act 1981 section 78s. 78 of the Finance Act 1981. They applied for payment of £675,390 tax to be postponed.
(h) This application for postponement was agreed by the Revenue on 23 December 1988. Of the total tax assessed of £898,020 it was therefore agreed that £675,390 would be postponed, leaving £222,630 payable on 22 January 1989 (paid on 18 January).
(i) The taxpayer and the Revenue agreed within the meaning of theTaxes Management Act, Taxes Management Act 1970 section 54s. 54 on 16 March 1992, that the assessment should be treated as varied in the sum of £3,564,055 (gains) and the balance of tax due was paid on the dates shown in subpara. (1).
(j) On 19 March 1991, the Revenue advised Levy Gee that the assessment issued on 7 November 1988 was raised on the basis of information supplied "late" and consequently, interest would be sought underTaxes Management Act 1970 section 88s. 88 on the ultimate tax payable under the assessment, interest to run from 1 December 1988.
(k) The interest determination in respect of which this appeal arises was raised on 10 March 1992. This was duly appealed on 3 April 1992.
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(l) The tax payments made (in summary) were as follows:
Dates of Payment
Amount
(£)
18/01/89
222,630.00
24/10/89
675,390.00
24/10/89
140,975.40
01/05/92
28,241.10
Total tax
1067,236.50
(a) The cases referred to were:
Cockerline (WH) & Co Ltd v IR Comrs TAX(1930) 16 TC 1.
IR Commrs v National Federation of Self-Employed and Small Businesses Ltd ELR[1982] AC 617.
Kingsley v Billingham (HMIT) TAX...
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Billingham (Inspector of Taxes) v Myers
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