Gold Nuts Ltd and Others
| Jurisdiction | UK Non-devolved |
| Judgment Date | 20 February 2015 |
| Neutral Citation | [2015] UKFTT 432 (TC) |
| Date | 20 February 2015 |
| Court | First Tier Tribunal (Tax Chamber) |
Judge Anne Redston, Ms Helen Myerscough
Mr Budhdeo in person; Mr James Onalaja of Counsel, for Gold Nuts Limited and related companies and Mr Beecham Koonjah of Noviscom Limited, for Leyton Orient Dispensary Limited, Dispensary Holdings Limited and Noviscom Limited, appeared for Appellants.
Mrs Yeeni Naylor of HM Revenue & Customs Appeals and Reviews Unit appeared for the Respondents.
Procedure – Whether there is an interaction between self-assessment enquiries, corporation tax enquiries and Finance Act 2008 (FA 2008), Sch. 36 Notices and penalties on the one hand, and possible criminal prosecution on the other – Adjournment and directions for a preliminary hearing on these issues of principle – Whether cases should remain joined – Whether to grant privacy direction – Whether to recategorise as complex – Held, cases to remain joined but recategorised as complex, privacy direction not granted.
The First-tier Tribunal (FTT) refused an application to set aside an earlier FTT direction that an individual taxpayer's appeals and applications be joined with those of companies for which he was a director. The FTT also decided that the case should not be held in private and should be reclassified as complex. The case was adjourned, with three further issues to be decided at a preliminary hearing.
Gold Nuts Ltd was the parent company of a number of companies, of which Mr Budhdeo was a director of all the companies. HMRC enquired into Mr Budhdeo's affairs under COP9, in relation to which Mr Budhdeo refused to sign the Contractual Disclosure Facility on the basis that he had not committed tax fraud and would not admit to something he had not done. HMRC also opened various enquiries into his personal tax returns, some of the companies' tax returns, a partnership of which Mr Budhdeo was a partner and it had issued information notices on some of the companies and relating penalties for non-compliance. Mr Budhdeo applied to close the enquiries into his personal tax returns and the COP9 enquiry, the companies applied for at least some of the enquiries into the company tax returns to be closed and they appealed against at least some of the information notices and relating penalties for non-compliance. All the appeals and applications were joined. Gold Nuts Ltd had previously applied to the FTT for the companies' appeals to be separated from Mr Budhdeo's appeals and applications, but this had been refused.
The FTT had five issues to consider:
1) whether it should allow the application to set aside and amend the FTT direction that Mr Budhdeo's appeals and applications be joined with those relating to the companies;
2) whether it had the jurisdiction to close a COP9 enquiry, and if so, whether it should direct the closure of the enquiry;
3) whether HMRC was using its civil powers to obtain information for the purposes of a possible criminal prosecution of Mr Budhdeo, and if so, if this was compatible with: (a) the provisions of the Police and Criminal Evidence Act 1984; and (b) the European Convention of Human Rights, art. 6;
4) if HMRC was using its civil powers to obtain information for the purposes of a possible criminal prosecution of Mr Budhdeo, what approach the FTT should take in relation to the appeals and applications; and
5) taking into account the decisions on issues (3)–(4), what it should do about the various appeals and applications.
In relation to issue (1) the FTT refused the application to set aside the direction, finding there to be no basis for setting aside the direction.
The FTT decided to adjourn the hearing and to direct that issues (2) to (4) be decided at a preliminary hearing.
Even though neither Mr Budhdeo nor the companies had made applications for the case to be determined in private the FTT decided it should consider the issue. With reference to the Court of Appeal case of Global Torch Ltd v Apex Global Management Ltd UNK[2013] EWCA Civ 819, the High Court case of R & C Commrs v Banerjee (No 2) TAX[2009] BTC 337, and the FTT cases of Chan TAX[2014] TC 03395 and Swallow TAX[2010] TC 00742 and the VAT tribunal case of McNicholas Construction Co Ltd VAT[1997] BVC 2,475, the FTT concluded that even though a privacy order might have been justified in the public interest of preserving the integrity of any criminal investigation, that opportunity had been lost because the hearing had taken place in open court. Therefore, there was no point in directing that the preliminary hearing be held in private.
During the hearing it was also agreed by the parties that the case should be recategorised. Following the guidance in the UT case of Capital Air Services Ltd v R & C Commrs VAT[2010] BVC 1,574, the FTT decided to recategorise the case as complex.
This case covered several procedural issues, but with three of the issues carried forward to a future preliminary hearing, the case is likely to have a way to go yet before it is decided.
[1] These cases were listed for a two day hearing to decide various appeals and applications (the Appeals and Applications) made by Mr Budhdeo and the companies at [15] and [16] below (the Companies). They included:
1) an application to close an enquiry which had been opened by HM Revenue & Customs (HMRC) on Mr Budhdeo under Code of Practice 9 (COP9);
2) applications to close enquiries opened under Finance Act 1998, Schedule 18, paragraph 24 (Sch 18) into some of the Companies' corporation tax (CT) returns;
3) applications to close enquiries opened under Taxes Management Act 1970 (TMA) s 9A into Mr Budhdeo's self-assessment (SA) tax returns for 2011–12 and 2012–13;
4) appeals against Notices issued under Finance Act 2008, Schedule 36, paragraph 1 (Sch 36 Notices);
5) appeals against penalties issued under Finance Act 2008, Schedule 36 (Sch 36).
[2] It appeared to us that there were five issues:
1) whether the Tribunal should allow the application made by Mr Budhdeo and Mr Koonjah to set aside and amend the direction made by Judge Kempster on 15 January 2015;
2) whether the Tribunal had the jurisdiction to close a COP9 enquiry, and if so, whether it should direct the closure of the enquiry;
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3) whether HMRC was using its civil powers to obtain information for the purposes of a possible criminal prosecution of Mr Budhdeo, and if so, if this was compatible with:
a) the provisions of the Police and Criminal Evidence Act 1984 (PACE); and
b) article 6 of the European Convention of Human Rights (the Convention);
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c) if HMRC was using its civil powers to obtain information for the purposes of a possible criminal prosecution of Mr Budhdeo, what approach the Tribunal should take in relation to the Appeals and Applications, particularly in the context of:
a) TMA, section 28(6), which states that the Tribunal shall direct the closure of an SA enquiry on application by the taxpayer, unless satisfied that there are reasonable grounds for not doing so;
b) the similar provisions in Sch 18, para 33(3) in relation to applications to close enquiries into CT returns;
c) the requirement in Sch 36, para 1 that the information or document is reasonably required by the officer for the purpose of checking the taxpayer's tax position;
d) the Tribunal's power to cancel a penalty under Sch 18, para 48;
e) the Human Rights Act 1998 (HRA), section 2(1), which says that primary legislation shall be construed so far as it is possible to do so in a way which is compatible with a person's rights under the Convention, and HRA s 3, which says that a tribunal must take into account judgments of the European Court of Human Rights when determining a question in connection with a person's Convention rights, so far as … it is relevant to the proceedings in which that question has arisen; and
f) the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (the Tribunal Rules), particularly the overriding objective at rule 2 and the power to stay proceedings at rule 5(3)(j);
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g) taking into account the Tribunal's decisions on issues (3)–(4), whether it should:
a) close one or more of the enquiries opened under Sch 18 into the Companies' CT returns;
b) close one or both the enquiries opened under TMA s 9A into Mr Budhdeo's SA tax returns for 2011–12 and 2012–13;
c) confirm, vary or set aside the Sch 36 Notices;
d) confirm, vary or cancel the penalties issued under Sch 36;
e) stay one or more of the Appeals and Applications under rule 5(3)(j) pending a decision by HMRC on the possible criminal prosecution of Mr Budhdeo; and/or
f) take another course of action.
[3] In relation to issue (1), we refused the applications to set aside Judge Kempster's direction, for the reasons given at paragraph 29ff. The Appeals and Applications remain joined.
[4] Mrs Naylor applied for an adjournment to give HMRC time to take legal advice on issue (3). The Appellants agreed that an adjournment followed by the separate hearing of issues (2) and (3) was the appropriate way to proceed. We decided to adjourn the case and to direct that issues (2) to (4) be decided at a preliminary hearing. We invite submissions from the parties on issue (4) as well as issues (2) and (3) at that hearing.
[5] We considered whether the case should be held in private, but decided that it should not, see paragraph 60ff.
[6] We reclassified the case as complex, for the reasons set out at paragraph 80ff. The consequences of that classification are explained at paragraph 94ff.
[7] Before the hearing, we received seven lever arch files of documents from HMRC and a skeleton argument from the Appellants. The day before the hearing, we were informed by the Tribunals Service that further documents had been provided by the Appellants and were on their way to Royal Courts of Justice. However, the Appellants' four lever arch files arrived after the hearing. The Appellants did not seek to refer to...
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