Commissioners of Inland Revenue v Wilkinson
| Jurisdiction | England & Wales |
| Judgment Date | 22 May 1992 |
| Date | 22 May 1992 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal (Civil Division).
Neill, Scott and Steyn L JJ.
Launcelot Henderson (instructed by the Solicitor of Inland Revenue) for the Crown.
Michael Ashe (instructed by Davies Arnold & Cooper) for the taxpayer.
The following cases were referred to in the judgment:
Bird & Ors v IR Commrs; Breams Nominees Ltd & Anor v IR Commrs ELRTAX[1989] AC 300; [1988] BTC 164
Bye (HMIT) v Coren & Anor TAX[1986] BTC 330
IR Commrs v Aken WLRTAX[1990] 1 WLR 1374; [1990] BTC 352
IR Commrs v Pearlberg WLR[1953] 1 WLR 331
This was an appeal by the Revenue against an order of Mr Gareth Williams QC sitting as a deputy judge of the High Court made on 8 August 1991 allowing the taxpayer's appeal against summary judgment under the Rules of the Supreme Court, O. 14 for payment of tax due given by a master on 10 May 1991.
On 3 April 1984 the taxpayer received three notices of assessment for each of the years 1977-78 and 1978-79. For 1977-78 an estimated sum of £950,000 was assessed to income tax under Sch. D as well as under theIncome and Corporation Taxes Act 1970 section 488Income and Corporation Taxes Act 1970, sec. 488 (artificial transactions in land) and to capital gains tax. The assessments for 1978-79 were similar but in the sum of £450,000. The notices of assessment were accompanied by a letter from the inspector expressing concern that the taxpayer appeared not to have made adequate returns for the two years. The letter stated:
Once I have your Returns, we shall be able to agree on a claim in respect of being assessed to tax more than once for the same cause so that any overcharge can be remedied.
On 25 April the taxpayer's solicitor wrote to the inspector in response to the assessments informing the inspector that the taxpayer had decided not to appeal although any liability to the tax assessed was denied. The assessments therefore became final on 3 May.
Eventually a writ was issued claiming summary judgment for the total amount assessed under all three assessments. The taxpayer put in a defence claiming that all the assessments were invalid because tax was demanded three times on the same alleged receipts. The Revenue then amended the writ so as to confine the claims to the tax assessed underIncome and Corporation Taxes Act 1970 section 488sec. 488 of the 1970 Act.
The taxpayer contended that the inspector had no power to make cumulative assessments. He accepted that assessments might normally only be challenged under the statutory appeals procedure but where the inspector had acted outside his power to assess under the Taxes Management Act 1970 section 29 subsec-or-para (1)Taxes Management Act 1970, sec. 29(1)(b), the assessments were void ab initio. Accordingly the prescribed procedure need not be used and a challenge to the assessments might be mounted in defending the Revenue's action.
Held, dismissing the taxpayer's appeal:
1. The letter of 3 April 1984 did not suggest that the assessments were cumulative. The inspector had to use the existing forms which appeared to impose a cumulative liability but he clearly expected the taxpayer to make returns so that a decision as to which assessment was appropriate could be reached. It was also clear from the letter that the inspector expected the taxpayer to appeal, and if he had the position would have been adjusted.
2. To have pursued the cumulative claim would have been vexatious and oppressive. But the vexatious element had been removed by the amendment of the statement of claim when the Revenue elected to pursue only the Income and Corporation Taxes Act 1970 section 488sec. 488 assessments. After the amendment of the statement of claim the taxpayer had no arguable defence to the action.
Neill LJ: I will ask Scott LJ to give the first judgment.
Scott LJ: This is an appeal by the Commissioners of Inland Revenue against an order made on 8 August 1991 by Mr Gareth Williams QC sitting as a deputy judge of the High Court, whereby he allowed an appeal by the defendant, John Gordon Wilkinson, against the summary judgment order made by Master Murray on 10 May 1991. The order made by Master Murray ordered the defendant to pay the commissioners the sum of £1,185,971 and costs. The £1,185,971 represented tax due under certain assessments which had been made against the defendant, had not been appealed and had become final.
The only question before Master Murray, before the deputy judge and before this court is whether the defendant has any arguable defence to his apparent liability under those assessments. In my judgment he does not.
The relevant history of the matter can be shortly stated. On 3 April 1984 the inspector of taxes dealing with the defendant's affairs, a Mr Longden, wrote the defendant a letter expressing concern that the defendant had not, in the inspector's opinion, yet made full returns for the tax years 1977-78 and 1978-79. In his letter, the inspector said this:
Though I am still awaiting your Returns, I do have some information concerning your business activities. I consider this information leads me to the conclusion that you have made profits or gains...
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