Billows Ltd v Robinson
| Jurisdiction | England & Wales |
| Judgment Date | 18 December 1989 |
| Date | 18 December 1989 |
| Court | Chancery Division |
Chancery Division.
Vinelott J.
Mr Giles Goodfellow (instructed by Denton Hall Burgin & Warrens) for the taxpayer and the company.
Mr Alan Moses (instructed by the Solicitor of Inland Revenue) for the Crown.
The following case was referred to in the judgment:
Les Croupiers Casino Club v Pattinson (HMIT) TAX[1987] BTC 475
These were appeals from a decision of the general commissioners for Bletchley dismissing appeals against the amount of assessments to Sch. E tax on the taxpayer and assessments to corporation tax on a company.
The taxpayer and his wife were the directors and principal shareholders in a company incorporated in 1972.
After investigation of the company's PAYE records the inspector took the view that the taxpayer's and his wife's declared income was insufficient to support their standard of living and that undeclared profits of the company had been used to meet their living expenses.
The inspector made assessments and further assessments on the taxpayer under Sch. E for the years from 1972-73 to 1985-86 in respect of emoluments and benefits received from the company by the taxpayer and his wife. Corporation tax assessments and an assessment under theSI 1973/334 section 29 subsec-or-para (1)Income Tax (Employment) Regulations 1973 (SI 1973/334), reg. 29(1) were also made on the company.
The inspector stated that he had calculated the Sch. E assessments by taking a figure for 1972 and extrapolating that figure forward for subsequent years based on the cost of living index.
The commissioners accepted in principle the inspector's method of calculating the requirements of the taxpayer and his wife. They rejected the taxpayer's explanation that he and his wife lived modestly to conserve funds in the business and that they had used capital resources to make up the difference between their declared income and their expenses.
On appeal the taxpayer contended that the commissioners had failed to appreciate the gravity of the the charges made against the taxpayer. The Crown's case amounted to an allegation of fraud and in those circumstances the probative value of the evidence was insufficient. In particular, the inspector's method of estimating the taxpayer's expenditure requirements was unreasonable.
Held, dismissing the appeals.
1. The commissioners had appreciated that the Crown's case was that the taxpayer had diverted cash from the company into his own pocket, and that the burden was on the Crown to establish their allegations.
2. It was impossible to say that the inspector's estimate of the taxpayer's requirements was unreasonable. The commissioners were entitled to reject the taxpayer's explanation that he had used capital for living expenses and to accept the inspector's method of calculating the amount that he and his wife required to maintain their standard of living.
1. At meetings of the commissioners for the general purposes of the income tax for the Division of Bletchley held on 30 April, 1 May and 27 August 1987 Leonard Kay Billows ("Mr Billows") appealed against assessments raised upon him under Sch. E in relation to emoluments and benefits arising from his and his wife's offices as directors of Billows Ltd ("the company") for the years 1972-73 to 1985-86 inclusive. At the same time by consent of parties we heard appeals by the company against assessments to corporation tax for the accounting periods ended 30 April 1973 to 1986 and a determination under SI 1973/334 regulation 29reg. 29 of the Income Tax (Employments) Regulations1973 (SI 1973/334) for 1978-79. Mr D A Silverton of Messrs Everett Collins & Loosley, chartered accountants appeared on behalf of Mr Billows and the company and Mr Billows gave evidence. The inspector represented the Revenue.
2. The assessments had been raised on Mr Billows and the company in the alternative and for out of time years of assessment or accounting periods, had been raised with leave. For years of assessment or accounting periods from April 1973 to 1980 the assessments had been made on the footing and for the purpose of making good to the Crown a loss of tax wholly or partly attributable to the fraud, wilful default, default or neglect of Mr Billows or the company.
3. The questions for our determination were, on Mr Billows' appeals, the true quantum of his and his wife's emoluments and benefits in kind as directors of the company in the relevant years of assessment and on the company's, the quantum of its profits chargeable to corporation tax and its reg. 29 liability, having regard in particular to what we determined to be the emoluments and benefits of the directors. By consent of parties we dealt with the two sets of appeals together and accordingly in the paragraphs which follow (including that relating to the documentary evidence) our findings of fact, the parties' contentions and our decisions are expressed in terms which apply both to Mr Billows and the company.
4. [Paragraph 4 listed the documents proved or admitted before the commissioners.]
5. From the evidence documentary and oral before us we found the following facts proved or admitted:
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(a) Balance sheets, trading and profit and loss accounts of the company were submitted to the Inland Revenue by Brett Jenkins and Partners for accounting periods ended 30 April 1973 to 30 April 1983 and Everett Collins & Loosley for accounting periods ended 30 April 1984 to 30 April 1986.
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(b) Tax returns of Mr Billows were submitted by Brett Jenkins & Partners 1973-74 to 1979-80 and 1982-83 and by Everett Collins & Loosley 1981-82 and 1983-84 to 1986-87. No return was made for 1980-81 and the returns for 1981-82 and 1983-84 to 1986-87 were provided on 6 March 1987.
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(c) On 19 June 1980 an investigation of the company's operation of PAYE for the year 1979-80 was undertaken. Certain irregularities were disclosed. A further examination of the company's prime records was undertaken on 27 October 1980 which revealed that the original records had been amended in certain particulars and in the circumstances a review of the company's affairs was commenced.
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(d) The Inland Revenue also requested explanation of the apparent paucity of sums available to meet Mr Billows' and his wife's private living expenses. In reply to that request Mr Billows and/or his agents submitted the documents referred to as document IR/E.
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(e) The company (formerly known as Billows Graphic Equipment Ltd) was incorporated on 26 September 1972. Its trade is described as "the design and sale of graphic equipment".
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(f) The shareholders and their interests as at balance sheet dates have been-
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(g) The directors have been and are Mr Billows and his wife, both resident at 1 Longdean Park, Hemel Hempstead, Herts throughout the life of the company. Mrs Sandra Buckley and Mr Collin Billows are daughter and son of Mr Billows and his wife.
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(h) Prior to commencing the company, Mr Billows was 50 per cent director/ shareholder in Protocol Engineering Co Ltd ("Protocol") from 25 April 1960 to 16 May 1972. For the period from 17 May 1972 to 25 September 1972 no details of any income had been supplied and so far as the Inland Revenue were aware Mr Billows was not employed but at the appeal meetings Mr Billows said he was engaged in business at Bletchley. Following the incorporation of the company on 26 September 1972 he had become its managing director and so continued to date.
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(i) From 26 September 1972 to 30 April 1986 the only other business interest of Mr Billows and his wife have been:
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(i) Byfield Engineering Ltd - a sales commission company from which he received £949 only, which sum was duly taxed in 1977-78.
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(ii) Kelloran Ltd - a property holding company incorporated on 12 October 1984 of which Mr Billows and his wife are directors but not shareholders.
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(j) Mr Billows' tax returns submitted made clear the following matters:
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(i) income was received from sundry building society accounts and the L K Billows Children's Trust;
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(ii) Mortgage interest was paid in respect of 1 Longdean Park, Hemel Hempstead;
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(iii) Sandra was born on 25 December 1957 and Colin on 9 April 1960, the former proceeding to higher education at Warwick University;
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(iv) the only capital assets acquired were shares embracing the company (then Billows Graphic Equipment) 4 September 1972 and 22 May 1973 and miscellaneous quoted shares from October 1983;
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(v) the only chargeable assets disposed of relate to the disposal by Mr Billows in 1972 of his 50 per cent shares in Protocol for...
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Billows Ltd v Robinson
...Moses QC (instructed by the Solicitor of Inland Revenue) for the Crown. This was an appeal by the taxpayer from a decision of Vinelott J ([1990] BTC 95) dismissing the taxpayer's appeal against the determination of the general commissioners for Bletchley upholding estimated assessments to S......