Burford v Durkin (HMIT)
| Jurisdiction | England & Wales |
| Judgment Date | 30 October 1990 |
| Date | 30 October 1990 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal (Civil Division).
Slade, Nicholls and Farquharson L JJ.
Mr Robin Mathew (instructed by Fairchild Grieg & Co) for the taxpayer.
Mr Alan Moses QC (instructed by the Solicitor of Inland Revenue) for the Crown.
The following cases were referred to in the judgment:
Agricultural, Horticultural and Forestry Training Board v Aylesbury Mushrooms Ltd WLR[1972] 1 WLR 190
C & E Commrs v Cure & Deeley Ltd ELR[1962] 1 QB 340
Craven (HMIT) v White ELRTAX[1989] AC 398; [1988] BTC 268
Honig & Ors v Sarsfield (HMIT) TAX[1986] BTC 205
Horder v Scott ELR(1880) 5 QBD 552
R v Commission for Racial Equality, ex parte Cottrell RothonWLR[1980] 1 WLR 1580
Income tax - Sub-contractors in the construction industry - Assessment on contractor for sums not deducted from payments to sub-contractors - Decision to assess taken and amount calculated by one inspector but assessment signed in Revenue's records by another - Whether assessment valid - SI 1975/1960 regulation 12Income Tax (Sub-Contractors in the Construction Industry) Regulations 1975 (SI 1975/1960), reg. 12.
This was an appeal by the taxpayer against a decision of Mervyn Davies J ([1989] BTC 540) that assessments made on him under theSI 1975/1960 regulation 12Income Tax (Sub-Contractors in the Construction Industry) Regulations 1975, reg. 12(1) were validly made.
The taxpayer, who himself held an exemption certificate issued pursuant to the Finance Act 1975 section 70Finance (No. 2) Act 1975, sec. 70, supplied workers to a building company on a labour only basis. It came to the attention of the Revenue that he had paid some of the workers who were not in possession of valid exemption certificates without making the proper deductions required byFinance Act 1975 section 69 subsec-or-para (4)sec. 69(4) of the 1975 Act.
Substantial assessments for the years 1978-79 to 1983-84 were made on the taxpayer under SI 1975/1960 regulation 12reg. 12(1) of the 1975 Regulations which conferred on the inspector a power to make an assessment "in the amount which, according to the best of his judgment the contractor is liable to pay". The taxpayer appealed to the special commissioners on the ground that the assessments were not validly made because the inspector, who had decided to make assessments and had calculated the amount, had not himself signed a certificate in the records of the Revenue but had instructed another inspector to complete the assessment procedure.
A single special commissioner dismissed the appeal having found that the first inspector had made the assessment but the second inspector had signed the assessment certificate as his agent.
The judge held that the assessment was made when the first inspector made the decision to assess and calculated the amount. At that stage the discretion conferred by SI 1975/1960 regulation 12reg. 12 was exercised so that it was the first inspector who "made" the assessment although it was later processed by the second inspector on his instructions.
The taxpayer appealed contending that the power to assess underSI 1975/1960 regulation 12reg. 12 imposed a heavy financial burden on the taxpayer and had to be strictly complied with. The inspector on whom the power was conferred had to make the assessment himself to the best of his judgment. The assessment was not finally made until it was signed, and, since it was not signed by the same inspector who exercised his discretion in making the decision, the assessment was invalid. Further, the Taxes Management Act 1970 section 1 subsec-or-para (3)Taxes Management Act 1970, sec. 1(3)(proceedings or administration started by one inspector continued by another) and Taxes Management Act 1970 section 113 subsec-or-para (1B)sec. 113(1B) (power of inspector to entrust responsibility for completing assessment to another) were not expressly incorporated in SI 1975/1960 regulation 12reg. 12 so that such powers were excluded in making an assessment under the regulation.
Held, dismissing the taxpayer's appeal:
1. An assessment was finally made when it was processed and a certificate signed, not at the earlier time when an inspector decided to make it. But it did not follow that the person who signed the certificate had made the assessment if he exercised no independent discretion of his own. The general rule, which applied to the discretion conferred bySI 1975/1960 regulation 12reg. 12 of the 1975 regulations was that, if an official on whom a power was conferred delegated mere administrative tasks to others, he had still exercised his statutory power.
2. The function of the second inspector had been to carry out a purely administrative act as agent for the first inspector as the special commissioner had found: he had exercised no discretion of his own.
3. Neither Taxes Management Act 1970 section 1 subsec-or-para (3)sec. 1(3) nor sec. 113(1B) of the Taxes Management Act 1970 prevented the general rule from applying.Taxes Management Act 1970 section 1 subsec-or-para (3)Section 1(3) was not a power to delegate and Taxes Management Act 1970 section 113 subsec-or-para (1B)sec. 113(1B)was introduced to deal with the necessity to confer authority on inspectors to authorise others to use computerisation in completing the assessment procedure.
The grounds of appeal were:
1. The judge misdirected himself in finding that the inspector, Mr Martin, made the assessments on the taxpayer in that:
(i) he did not do so; and
(ii) there being a finding of fact to the contrary in the case stated.
2. The judge erred in holding that an assessment could be made simply by the decision to assess and calculation of the amount without the amount and other relevant data being particularised in an assessment book or index authorised by signature of the officer charged with making the assessment.
3. The judge misdirected himself in distinguishing Honig & Ors v Sarsfield (HMIT) TAX[1986] BTC 205 on the basis that for "time limit purposes" an assessment was not made until it was particularised and signed by the authorised officer in the Revenue records: in the matter the judge found that an inspector made assessments at the time he instructed another to make assessments.
4. The judge failed to give due weight to the special character of the statutory deduction scheme found in Finance Act 1975 section 69sec. 69 of the Finance (No. 2) Act 1975 and administered via the SI 1975/1960 regulation 12Income Tax (Sub-Contractors in the Construction Industry) Regulations 1975; in particular the judge did not give proper weight to the necessity for strict compliance with the provisions of reg. 12.
Slade LJ: This is an appeal by a taxpayer, Mr Derek Burford, from an order made by Mervyn Davies J on 25 October 1989 ([1989] BTC 540) whereby he dismissed an appeal by Mr Burford on a case stated pursuant to Taxes Management Act 1970 section 56sec. 56 of the Taxes Management Act 1970.
Mr Burford became an employee of a firm of contractors ("Deedes") 30 or more years ago. In 1970 he was asked by his employers to become a self-employed labour-only contractor. He did that, and obtained a sub-contractor's exemption certificate, pursuant to Finance Act 1975 section 70sec. 70 of the Finance (No. 2) Act 1975 ("the 1975 Act").
The advantage of having an exemption certificate arose in this way. By virtue of Finance Act 1975 section 69 section 70sec. 69 and 70 of the 1975 Act, when a sub-contractor does not possess aFinance Act 1975 section 70sec. 70 certificate, the contractor is under a duty to deduct a percentage of the wages paid and to hand the sum deducted to the Revenue to be held by them on account of the tax which should be paid by the sub-contractor. Mr Burford's exemption certificate entitled him to be paid by any contractor for whom he worked without having tax deducted from his pay by the contractor. In fact in the event he worked only for Deedes. In time his activities as a self-employed labour-only contractor were successful. It seems that he hired out to Deedes as sub-contractors, or sub-sub-contractors, not only himself but other workers who were in relation to himself sub-contractors. Not all the persons employed by him as sub-contractors possessed valid tax certificates. In a number of cases over the years he appears to have paid sub-contractors of his who did not produce validFinance Act 1975 section 70sec. 70 certificates substantial gross sums, without making the proper deductions required byFinance Act 1975 section 69sec. 69 of the 1975 Act.
In due course the failure to make proper deductions came to the attention of the Revenue. As a result, Mr Burford's tax exemption certificate was cancelled on 29 February 1984. In addition assessments were made on him pursuant to SI 1975/1960 regulation 12reg. 12(1) of the Income Tax (Sub-Contractors in the Construction Industry) Regulations, SI 1975/1960 ("the 1975 Regulations") which were made pursuant to powers conferred byFinance Act 1975 section 69sec. 69 of the 1975 Act.
The amounts of the assessments were: 1978-79 £18,106.41; 1979-80 £60,430.53; 1980-81 £40,884; 1981-82 £56,460; 1982-83 £84,015.60; 1983-84 £97,941.
Mr Burford appealed to the special commissioners against the refusal of a Finance Act 1975 section 70sec. 70 certificate. That appeal failed and the matter was not pursued before Mervyn Davies J.
Mr Burford also appealed against the assessments themselves. The amounts of the assessments were not questioned before the judge. What was argued before him was the question whether, as the special commissioners had held, the assessments had been validly "made" within the meaning ofSI 1975/1960 regulation 12reg. 12(1) of the 1975 Regulations which, as amended, reads as follows:
Where-
(a) there is a dispute between a contractor and a sub-contractor as to the amount, if any, deductible by the contractor under the principal section from a payment to the sub-contractor or his nominee; or
(b) the Inspector...
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