Clarke v HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judgment Date | 08 January 2009 |
| Date | 08 January 2009 |
| Court | Special Commissioners (UK) |
special commissioners decision
Charles Hellier
The Appellant in person
Mrs Chris Cumming for the Respondents
Income tax - enquiry under Taxes Management Act 1970 section 9As. 9A TMA 1970, requirement to produce and furnish documents under Taxes Management Act 1970 section 19As. 19A TMA 1970 - taxpayer alleging enquiry opened and requirement made for vindictive reasons - taxpayer arguing that section 19A did not confer authority to require documents to be created - held: (1) the Tribunal was required to consider the actual purposes of the officer in giving notice under section 19A; (2) on the evidence the officer's purposes were the statutory purposes and were not vindictive; (3) section 19A did empower the officer to require the creation of documents; (4) subject to a minor variation the section 19A requirement was upheld
A special commissioner decided that documents required to be produced by the taxpayer were reasonably required by an officer of HMRC for purposes of an inquiry into his tax return. The tribunal was required to consider the actual purposes of the officer in giving notice under Taxes Management Act 1970 section 19As. 19A and whether, on the evidence, the officer's purposes were the statutory purposes and were not vindictive. Moreover, s. 19A empowered the officer to require the creation of documents.
The taxpayer appealed against a notice given to him under TMA 1970, s. 19A to provide certain documents and information. His principal ground of appeal was, broadly, that the notice was bad because it had been given for opprobrious reasons. In essence the taxpayer said that his tax returns were being investigated and documents and particulars were being sought from him as a means of paying him back for his success on behalf of one of his clients in an action before the general commissioners.
The taxpayer made a return for the year to 5 April 2006. He was subsequently given notice, in accordance with Taxes Management Act 1970 section 9As. 9A and within the time allowed, that an inquiry was to be commenced into his return. The taxpayer was required to produce certain documents and information under ten headings. HMRC said that the notice of enquiry was properly given and that the letter was notice within s. 19A specifying items which fell within Taxes Management Act 1970 section 19A subsec-or-para 2s. 19A(2)(a) and (b).
The taxpayer alleged that the inquiry was opened vexatiously and vindictively, and that the items specified were required for vindictive reasons, and that as a result the notice should be struck down. He argued that a requirement purportedly made under Taxes Management Act 1970 section 19As. 19A, but made for vindictive, vengeful or vexatious reasons was not a requirement for items which the officer reasonably required for the purpose of determining whether the taxpayer's return was correct; that at the conclusion of an earlier hearing before the general commissioners an HMRC officer had formed an intention to 'get back' at the taxpayer; and that intention was given effect by HMRC officers procuring that an inquiry was opened into the taxpayer's return in the course of which the specified items were required in the knowledge that those actions would cause the taxpayer inconvenience. Moreover, the taxpayer disputed the power of the officer under s. 19A to require him to create certain documents.
Whether the documents were reasonably required for the purposes of the inquiry; and whether HMRC was authorised to require documents to be created.
The special commissioner (Charles Hellier) (dismissing the appeal) said that TMA 1970, Taxes Management Act 1970 section 19A subsec-or-para 9s. 19A(9) required the appellate tribunal to consider whether the items were "reasonably required by the officer" for the statutory purpose, not simply whether they were "reasonably required". Further, the words of Taxes Management Act 1970 section 19A subsec-or-para 2s. 19A(2)(a) and (b) were: "as the officer may reasonably require" and treating the section as imposing only an objective condition effectively replaced them by "as may be reasonably required": it was the documents which that officer might reasonably require for the statutory purpose which were the subject of the notice. The words placed an emphasis on the role of that officer and the purpose pursued by his requirement.
A taxpayer might well question the judgment of an inspector, but normally there would be no serious suggestion that the inspector acted for improper purposes. Construing s. 19A as permitting an investigation into the purpose of the inspector in making his requirement would not seriously adversely affect its normal effectiveness. The test in s. 19A was subjective. The question was whether the officer required the items "for the purpose of determining whether … the return is incorrect or incomplete", or whether they were required for another purpose. If the enquiry was opened for a bad purpose, but the officer giving the s. 19A notice reasonably required the items for the statutory purpose, the notice had to be upheld; if the inquiry was opened for either a good or a bad purpose, but the officer gave the notice for the purpose of inconveniencing the taxpayer, then the notice could not have been given for the statutory purpose and had to be struck down. The question was whether any improper purpose infected the officer's decision to issue a s. 19A notice. Even if he had an improper purpose in opening the enquiry it was possible that once it had been commenced the officer's purpose in making his requirements was wholly for the statutory purposes. But it was also possible that if the officer had an improper purpose in opening the enquiry that purpose could have continued in relation to the requirements of his notice.
The standard of proof was on the balance of probabilities. On the evidence, the officer's only purpose in seeking the documents and particulars in his s. 19A notice was to determine whether the taxpayer's return was incorrect or incomplete, and none of his purposes consisted of a desire to, or to assist any other person to, or to acquiesce in any other person's desire to, get back at the taxpayer for his victory at an earlier general commissioners' hearing.
If the officer's purposes were not improper, the question remained whether the requirements were reasonably required by him. The taxpayer's submission that s. 19A could not require a taxpayer to create documents but that its ambit was instead limited to the delivery of existing documents to HMRC was rejected. It was clear that s. 19A might be used to impose an obligation to create certain documents. That was the import of the use of "furnish" in para. (b) as compared to the use of "produce" in para. (a), and of the reference in para. (a) to documents "in the taxpayer's possession or power", and the absence of those words in para. (b). Paragraph (b) would be superfluous if the taxpayer were correct (Accountant v HMITSCD(2000) Sp C 258 followed).
1. Mr Clarke appeals against a notice given to him under Taxes Management Act 1970 section 19Asection 19A TMA to provide certain documents and information.. His principal ground of appeal is, broadly, that the notice is bad because it has been given for opprobrious reasons. In essence Mr Clarke says that his tax returns are being investigated and documents and particulars are being sought from him as a means for paying him back for his success on behalf of one of his clients, Mr Ades, in an action before the General Commissioners.
2. The hearing of this appeal started in Brighton: there I heard initial argument and the oral evidence of Mr Ades. Mr Clarke made serious allegations against a number of HMRC's officers. Those officers were not present at the hearing in Brighton. They were not called to give evidence and could not be cross examined. I did not feel it proper to reach a conclusion in relation to the allegations Mr Clarke made without hearing the relevant officers. After hearing evidence and argument in relation to the other matters in the appeal I therefore directed that the hearing be adjourned to the soonest practicable date and that evidence from those officers be heard. Before the start of the reconvened hearing I provided an interim decision on the matters which had been raised before me and which would not be affected by the evidence of those officers. I recorded the evidence I had had before me, set out the conclusions I have reached thus far, and explained the directions I made. This final decision encompasses the findings of that interim decision.
3. Taxes Management Act 1970 section 19A subsec-or-para 1Section 9A(1) TMA provides that:
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(2) An officer of the Board may enquire into a return under section 8 or 8A of this Act if he gives notice of his intention to do so ("notice of enquiry")-
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(a) to the person whose return it is ("the taxpayer"),
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(b) within the time allowed.
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4. There is no mention in this provision of reasons for initiating such an enquiry. There is no express restriction on the purpose for which an enquiry may be made and no right of appeal against the instigation of an enquiry. I have no jurisdiction to review the reasons for which Mr Clarke's return was selected for enquiry or otherwise to set aside the enquiry.
5. Section 19A apples where an officer of the Board has given notice of enquiry in accordance with section 9A to a taxpayer. Subsections (1) and (2) provide:
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(2) This section applies where an officer of the Board gives notice of enquiry under section 9A(1) or 12AC(1) of this Act to a person ("the taxpayer").
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(3) For the purpose of the enquiry, the officer may at the same or any subsequent time by notice in writing require the taxpayer, within such time (which shall not be less than 30 days) as may be specified in...
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...TC 06763 at paragraph [101] and Elder [2014] TC 03849) at paragraph [46] and by the Special Commissioners in Clarke v R & C Commrs (2009) Sp C 735 at paragraph [22]. Mr Fell submitted that the ambit of the provision was wide enough to cover circumstances like the present. [74] Mr Fell submi......