Gold Nuts Ltd and Others
| Jurisdiction | UK Non-devolved |
| Judgment Date | 25 April 2017 |
| Neutral Citation | [2017] UKFTT 354 (TC) |
| Date | 25 April 2017 |
| Court | First Tier Tribunal (Tax Chamber) |
Judge Anne Redston
The appellants were not represented at the hearing
Ms Harry Jones, of HM Revenue and Customs' Appeals and Reviews Unit, appeared for the respondents
Corporation tax – Appeals against Finance Act 2008 (“FA 2008”), Sch. 36 notices and applications to close enquiries under Taxes Management Act 1970 (“TMA 1970”), s. 28A – Whether to postpone hearing – Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273), r. 2 and 33 – Sch. 36 notices delivered at the same time as enquiry notices – Whether Condition A of Sch. 36, para. 21 met – Whether “information” includes appellants' reason for not applying a statutory provision when calculating their tax – Sch. 36 notices upheld apart from three items – No closure notices directed.
The First-tier Tribunal (FTT) refused the taxpayer companies' request for a postponement, decided not to direct closure of any enquiries and dismissed appeals against information notices, with the exception of 3 of the 48 items.
HMRC opened enquiries into the corporation tax returns of Gold Nuts Ltd and five of its subsidiaries (together “the appellants”). At the same time HMRC issued information notices to each appellant in respect of the same accounting period pursuant to Finance Act 2008 (“FA 2008”), Sch. 36, para. 1, requiring a total of 48 items.
The appellants:
• applied to the FTT for a direction to close the enquiries;
• appealed against the information notices; and
• applied to postpone the hearing of the appeals and applications.
As well as applying to postpone the hearing, no representative of the appellants attended. After considering the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273), r. 33 the FTT decided to proceed with the hearing. The FTT found that the appellants had clearly been notified of the hearing and decided that it was in the interests of justice and the relevant aspects of the overriding objective in SI 2009/273, r. 2 to proceed. In particular the FTT noted that if the hearing had not proceeded the appellants would have succeeded in postponing the hearing when their earlier attempts to do so had been refused, most recently in Gold Nuts Ltd TAX[2017] TC 05602. And it was clearly “not in the interests of justice for parties to be able to circumvent tribunal decisions refusing postponement, by the simply failing to attend a hearing”.
In respect of the appellants submissions regarding the information notices the FTT found that:
1) Condition A of FA 2008, Sch. 36, para. 21 was satisfied. The appellants had argued that because the notice of enquiry and the information notice were both included in the same envelope the condition was not met because the condition was only met if the statutory enquiry was “already open” at the time the information notice was issued, because para. 21(4) requires that the notice of enquiry “has been given”. However the FTT agreed with HMRC that Condition A was met if HMRC issued the notice of enquiry at the same time as the Sch. 36 notice.
2) Although the tribunal had not yet determined whether other information notices issued to the appellants should be upheld the issuance of further information notices was not unreasonable. Finance Act 2008, Sch. 36, para. 21 sets certain statutory conditions before an information notice can be given with Condition A linked to the enquiry window. Just as it could not be unreasonable if HMRC opened a statutory enquiry during that period, it also could not be unreasonable if they also issued a linked information notice and it would be “absurd” to hold that a taxpayer could significantly delay, or even prevent, the issuance of future information notices simply by appealing earlier notices.
3) The tribunal had no jurisdiction to strike down an information notice because HMRC opened its statutory enquiry on a “protective basis”, even if that was the position. The taxpayer's protection lied in its right to appeal the notice on the basis that one of the provisions of that Schedule. The appellants had argued that the issuance of the information notices was unreasonable in the context of protective enquiries into the accounting periods.
4) The tribunal could not allow the appeal on the basis that the information/documents required by the information notices were “exorbitant and unreasonable” as they required a “plethora of information”. If anything requested was not a statutory record the FTT would have to consider item by item whether it met the “reasonably required” test.
Looking at the specific items in the information notices the FTT noted that to the extent that the items were statutory records, they were not appealable.
The FTT found that 45 of the 48 requested items were either statutory records or reasonably required. It did however allow the appeals against three items, being:
• two requests for opinions on points of law, in this case why the relevant companies did not consider that a loan was within the Corporation Tax Act 2010 (CTA 2010), s. 455. As part of the enquiry HMRC could ask why a particular tax position had been adopted, but that was part of the enquiry process, not part of the purpose of an information notice; and
• a request for a schedule which had already been provided.
In respect of the application for a direction to close the enquiries, the FTT found that there were still far too many uncertainties to make it appropriate either to direct the immediate closure of the enquiries, or to set a future date for closure.
The FTT accordingly decided not to direct closure of any of the enquiries and upheld all the information notices, with the exception of the three items mentioned above.
The FTT found that it could not direct that the enquiries be closed because there were still too many uncertainties. The three items of information the FTT decided were not required to be provided were opinions on points of law and a schedule which had already been provided.
[1] HMRC had opened enquiries under Finance Act 1998, Sch 18, para 24 into the corporation tax (“CT”) returns for the 2013 accounting period filed by Gold Nuts Ltd (“Gold Nuts”) and five of its subsidiary companies: Blackbay Ventures Ltd (“Blackbay”), Bronze Nuts Ltd (“Bronze Nuts”), Corona Properties Ltd (“Corona”), R Square Properties Ltd (“R Square”), and Venture Pharmacies Ltd (“Venture Pharmacies”), together “the Appellants”.
[2] HMRC also issued a Notice under Finance Act 2008, Schedule 36, paragraph 1 (“Sch 36 Notice”) to each Appellant in respect of the same accounting periods, so there were six such Notices under appeal, each of which required one or more listed items (“Item” or “Items”); altogether 48 Items were listed. Each Appellant appealed against its Sch 36 Notice (“the Appeals”).
[3] In their notifications of the Appeals to the Tribunal, the Appellants also asked that “HMRC should issue [a] closure notice” in relation to the periods under enquiry. I have taken this as being an application for the Tribunal to direct the closure of those enquiries (“the Applications”).
[4] The Appellants applied to postpone the hearing of the Appeals and Applications, and no representative of the Appellants attended the hearing. For the reasons set out at paragraphs 41–48, I decided not to stay the Appeals and Applications, but to proceed in the absence of the Appellants' representative. In order to understand the background to the Appellants' failure to send a representative, it is necessary first to set out what happened before the hearing commenced, and I explain this at paragraphs 17–36.
[5] I went on to hear and consider the evidence and submissions in relation to the Sch 36 Notices. Having done so, I decided not to direct closure of any of the enquiries. I also upheld all the Sch 36 Notices, with the exception of the following three Items:
1) Item 10 of the Sch 36 Notice issued to Gold Nuts, and Item 15 of the Sch 36 Notice issued to Blackbay. These required explanations as to why the companies had not applied Corporation Tax Act 2010, s 455 in the context of loans they made to an LLP. In my judgment, that is not “information” which can be required under a Sch 36 Notice, see paragraphs 121–124.
2) Item 1 of the Sch 36 Notice issued to R Square. This required the provision of a “schedule” which had already been provided, see paragraphs 151–153.
[6] In accordance with Sch 36, para 32(4)(a), I issued a direction requiring compliance with the Sch 36 Notices by thirty days from the date of issue of this decision, see paragraph 166.
[7] The legislation relevant to the Appeals and Applications is set out in the Appendix.
[8] HMRC provided a helpful bundle containing the documentation relating to the Appeals and Applications.
[9] Mr James Moss, the lead investigator responsible for enquiries into Gold Nuts and its subsidiary/related companies and businesses, provided a witness statement and gave oral evidence, led by Ms Jones. I found him to be an honest and straightforward witness.
[10] On the basis of that evidence, and taking into account also the related litigation relied on by both parties, I make findings of fact about the Appeals and Applications generally at paragraphs 11–15 and paragraphs 17–18. Specific findings of fact in relation to each of the Appellants are set out in Part 4.
[11] R Square and Corona filed CT returns for the accounting period ended 31 December 2013 on 30 December 2014; Gold Nuts, Blackbay and Venture Pharmacies filed their CT returns for the same period on the following day, 31 December 2014. On the same day, Bronze Nuts filed its CT returns for the periods ending 21 June 2013 and 31 December 2013.
[12] On 21 December 2015, Mr Moss opened enquiries in those CT returns under FA 1998, Sch 18, para 24. He then issued Sch 36 Notices, which he included in the same envelope as the notices of enquiry.
[13] On the basis of...
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