Carco Accessories Ltd v Commissioners of Inland Revenue
| Jurisdiction | Scotland |
| Judgment Date | 05 June 1985 |
| Date | 05 June 1985 |
| Court | Court of Session |
Court of Session.
Mr. R.N.M. Anderson (instructed by Shepherd & Wedderburn, W.S.) for the taxpayer.
Mr. A.C. Hamilton and Mr. J.G. Reid (instructed by the Solicitor of Inland Revenue) for the Crown.
Before: The Lord President (Lord Emslie), Lord Cameron and Lord Grieve.
Corporation tax - Accounts - Failure to comply with notices to produce company accounts - Penalties - Whether proceedings commenced out of time - Whether penalties excessive - Taxes Management Act 1970 section 54 section 94 subsec-or-para (2) section 103 subsec-or-para (3)Taxes Management Act 1970, sec. 54, 94(2), 103(3).
The taxpayer company appealed by way of case stated against a determination of the General Commissioners that they were liable to penalties under Taxes Management Act 1970 section 94 subsec-or-para (2)sec. 94(2) of the Taxes Management Act 1970 for failure to comply with notices requiring them to supply returns of the company's profits.
Notices were served on the taxpayer company in November 1982, 1983 and 1984 under Taxes Management Act 1970 section 11sec. 11of the 1970 Act requiring from them within 30 days a return of the company's profits for the 12 months accounting period ending on 30 June of the same year. The taxpayer company failed to comply with each of those notices. Estimated assessments to corporation tax were made for those years and the tax duly paid. In 1978 an inquiry was begun into the taxpayer company's tax affairs, whereupon accounts were submitted for the years in question. Further assessments to tax for those years were made and each was appealed. It was agreed that a further £40,157.20 was owing for the years 1972-75 subject to conditions.
It was submitted for the taxpayer company that the proceedings commenced on 27 June 1983 were out of time by reason of Taxes Management Act 1970 section 103 subsec-or-para (3)sec. 103(3) of the Act, since the amount of tax chargeable for each of the three accounting periods had been fully determined on a date more than three years before by an agreement between the taxpayer company and the inspector in an exchange of letters in 1979. It was further contended that the penalty imposed by the Commissioners was excessive.
For the Crown it was argued that there was no agreement within the meaning of Taxes Management Act 1970 section 54sec. 54of the Act made in 1979 so the proceedings were commenced in time. It was further maintained that the penalty imposed by the Commissioners was not excessive and should stand.
Held, dismissing the taxpayer company's appeal:
1. There was no agreement in 1979 for the purposes of Taxes Management Act 1970 section 54sec. 54 between the taxpayer company and the Revenue concerning the amount of tax due, so the proceedings were commenced in time.
2. The Commissioners directed themselves correctly on the question of a penalty. The award was not unreasonable and would stand.
1. Proceedings against the appellants for the recovery of penalties under Taxes Management Act 1970 section 94 subsec-or-para (2)Taxes Management Act 1970, sec. 94(2) were commenced before us by information laid by John Temple Bertram, one of Her Majesty's inspector of taxes and exhibited before two Commissioners for the general purposes of the Income Tax Acts on 27 June 1983. The said information of which a copy is attached hereto (Exhibit 1) stated that the appellants failed to make a return of profits within one month from the service of Notices under Taxes Management Act 1970 section 11sec. 11 of the Taxes Management Act 1970 in respect of the three 12-month accounting periods year ended at the 30th day of June in each of the three years 1972, 1973 and 1974 and that in each case the failure continued after the end of the period of two years beginning with the date on which the notice was served. The information further stated that the appellants thereby rendered themselves liable to penalties not exceeding £25,639.04, that sum being made up as follows:
Tax on Profits |
Total |
||
Count |
Accounting Period |
not returned |
Penalty |
1 |
Year ended 30 June 1972 |
£1,650.80 + £50 |
£1,700.80 |
2 |
Year ended 30 June 1973 |
£6,032.88 + £50 |
£6,082.88 |
3 |
Year ended 30 June 1974 |
£17,805.36 + £50 |
£17,855.36 |
£25,639.04 |
2. The appellants were summoned by Summons dated 27 June 1983 to appear before the General Commissioners of Income Tax for the Division of Dumbarton East sitting at Glasgow on 7 September 1983 to answer the said information. A copy of the Summons is attached hereto (Exhibit II). At the request of the appellants the aforementioned date was altered and the case was heard by the Commissioners on 21 and 30 November 1983. On 21 November a further continuation was requested on behalf of the appellants to allow additional time to prepare the case. In view of the fact that the appellants had already obtained a continuation for a similar reason the request was refused. On the latter day we made an award of penalties against the appellants in the sum of £18,000, and the appellants now wish to appeal against our award.
3. At the hearing the appellants were represented by Mr. Richard Anderson, Advocate, and the Inland Revenue by Miss E.M.M. McLean, Solicitor of the Office of the Solicitor of Inland Revenue for Scotland.
4. [Paragraph 4 set out the persons who gave evidence before the Commissioners.]
5. [Paragraph 5 set out the documents admitted before the Commissioners.]
6. Before Miss McLean proceeded with the case for the Revenue Mr. Anderson put forward a plea that the penalty proceedings were time-barred. Mr. Anderson contended that the Appeal had been determined under Taxes Management Act 1970 section 54sec. 54 of the Taxes Management Act 1970 by an exchange of correspondence (Productions 2 dated 19 June 1979 and 1 dated 24 August 1979). (We interpolate at this point that all statutory references hereinafter are to the said Taxes Management Act 1970 unless otherwise stated.) In terms of Taxes Management Act 1970 section 103 subsec-or-para (3)sec. 103(3) of the Act proceedings for penalties must be commenced within three years of the final determination of the tax assessable. As the assessments in the present case had been finally determined, Mr. Anderson said, on 24 August 1979 the present proceedings which were commenced on 27 June 1983 were time-barred. Mr. Anderson further relied on Productions 3 and 4 in support of his arguments. He referred to Delbourgo v. Field UNK[1978] STC 234. In reply Miss McLean contended that appeals against the assessments for the three accounting periods in question (and also against an assessment for the accounting period ended 30 June 1975) had been determined by the General Commissioners at the commencement of a meeting on 25 May 1981 at which the Commissioners had subsequently granted an application by the Revenue for an interest certificate under Taxes Management Act 1970 section 88sec. 88. The appeals against the assessments had been duly listed for hearing by the General Commissioners in a notice of 16 April 1981 issued by our Clerk to the appellants' agents on 16 April 1981. As regards the exchange of correspondence of 19 June and 24 August 1979 it was made plain by the inspector in that correspondence that his calculation of the profits assessable was provisional only, being expressly tendered as subject to the inspector's receiving statements of assets held by the three directors of the company. Accordingly there was no determination under Taxes...
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King v United Kingdom (13881/02)
...of the penalties were reasonable as a 20% reduction had been given. She cited Carco Accessories Ltd v Inland Revenue Commissioners (1985) 59 TC 45 where penalties of 70% had been imposed but which had been a very simple case compared to the present appeal and where there had been no denials......