Gold Nuts Ltd and Others

JurisdictionUK Non-devolved
CourtFirst Tier Tribunal (Tax Chamber)
Judgment Date16 January 2017
Neutral Citation[2017] UKFTT 84 (TC)
Date16 January 2017

[2017] UKFTT 084 (TC)

Judge Anne Redston

Gold Nuts Ltd & Ors

Mr Shamir Pravin Budhdeo in person and Mr Beecham Koonjah of Noviscom Limited, appeared for the other appellants

Ms Harry Jones, of HM Revenue and Customs' Appeals and Reviews Unit, appeared for the respondents

Income tax – Corporation tax – Appeals against Finance Act 2008 (FA 2008), Sch. 36 notices and against penalties – Applications to close enquiries – Whether to stay the appeals and applications behind Mr Budhdeo's judicial review application – Veolia distinguished – Whether dominant purpose of the enquiries and FA 2008, Sch. 36 notices to obtain information to prosecute Mr Budhdeo – Whether information can be a statutory record – Whether the FA 2008, Sch. 36 notices should be upheld, varied or set aside – Whether to confirm the penalties – Whether to close the enquiries.

The First-tier Tribunal (FTT) refused a taxpayer's application to stay the proceedings, made minor amendments to 3 of 17 information notices, ordered that 4 of 41 enquiries be closed and confirmed 3 fixed penalties charged for failure to comply with information notices.

Summary

This decision encompassed the following appeals and applications:

  • applications to close HMRC enquiries into the corporation tax (CT) returns of the 13 linked corporate appellants, into two self-assessment tax returns of the individual appellant (Mr Budhdeo) and into a partnership return of the partnership appellant (Symbio Energy LLP or Symbio). In total there were 41 closure applications before the FTT;
  • appeals made by certain of the appellants against information notices issued under Finance Act 2008 (FA 2008), Sch. 36. There were 17 such notices under appeal, with 158 items listed as required; and
  • appeals against fixed penalties charged on Mr Budhdeo, Symbio and one of the companies for failure to comply with a FA 2008, Sch. 36 notice.

Mr Budhdeo was a director of many of the corporate appellants and a partner in Symbio.

There had been two preliminary hearings of the appeals and applications. In the first, Gold Nuts Ltd [2015] TC 04609, the FTT granted HMRC an adjournment to allow time to take advice on issues raised by the appellants and decided a number of preliminary matters. In the second, Gold Nuts Ltd [2016] TC 04875, the FTT decided various preliminary matters of law, including that the FTT did not have jurisdiction to close an HMRC enquiry opened under Code of Practice 9 (“COP9”), and issued detailed directions relating to the appeals and applications.

Mr Budhdeo applied, with the support of the other appellants, to stay the hearing of the appeals and applications. The application was resisted by HMRC. First, Mr Budhdeo submitted that the appeals and applications should be stayed behind a judicial review (“JR”) permission application he was making seeking the closure of a COP9 enquiry into his tax affairs and those of entities he was able to control, because in line with comments made in R (oao Veolia ES Landfill Ltd) v R & C Commrs [2015] BTC 23 there was overlap and “linkage” between the matters to be decided. Second, Mr Budhdeo submitted that if the hearing was to continue he would be unable to give evidence because he had been “charged” with a criminal offence within the meaning of art. 6 of the European Convention on Human Rights and therefore had a right not to self-incriminate. The FTT refused the stay application. In particular the FTT found that: the issues which would be decided in Mr Budhdeo's JR application were not the same as those before the FTT and therefore the case was distinguished from “Veolia”; the existence of a right to silence did not prevent that person from giving evidence; and if the proceedings were stayed there would have been further delay and wasted time and costs so would not have fallen within the FTT's requirement to deal with cases fairly and justly.

When the stay was refused Mr Budhdeo and the other appellants' representative withdrew from the proceedings, but the FTT continued with the hearing in the interests of justice.

With regard to the information notices the FTT considered which of the required items were statutory records, and therefore could not be appealed against (see para. 128–151 of the decision).

The appellants submitted that the statutory enquiries had been used by HMRC to obtain evidence for the possible criminal prosecution of Mr Budhdeo, describing them as “a mere pretext” for that dominant purpose. In the alternative they submitted that obtaining that evidence had an “equal dual purpose” alongside the exercise of HMRC's statutory powers; and this too was an abuse of the provisions. On this basis the appellants argued that: HMRC had no reasonable grounds for keeping the enquiries open and therefore the FTT should direct their closure; the information and documents required in the information notices were not reasonably required to check the taxpayer's tax position and they should therefore be set aside (apart from those requiring statutory records); and the appellants had a reasonable excuse for not complying with the FA 2008, Sch. 36 notices and any penalties should therefore be cancelled. The FTT noted that although when a person refuses a Contractual Disclosure Facility (CDF), following the issue of the COP9 letter (as Mr Budhdeo had done), the case could be escalated to a criminal investigation, in this case it had not, instead the HMRC officer had been given the authority to continue the case as a civil investigation. The FTT found that the dominant purpose of the appeals and applications was not to gather information so as to prosecute Mr Budhdeo. The FTT pointed out that that did not mean that HMRC were unable to use material gathered from the enquiries and FA 2008, Sch. 36 notices as evidence, were Mr Budhdeo to be charged with a criminal offence, but rather that any such use would be a secondary and incidental consequence.

The FTT went on to consider the enquiries and closure notices relevant to each of the appellants. Where the FTT upheld a notice, this was because the items which were not statutory records were reasonably required for the purposes of checking the taxpayer's tax position. Where the FTT decided not to direct the immediate closure of an enquiry it also decided not to set a future date by which the enquiry should be closed because, in each case, there were too many uncertainties to make it sensible or reasonable to set such a date.

In relation to the appeals and applications, the FTT:

  • varied the information notice issued to Mr Budhdeo to remove the requirement to provide a statement of assets and liabilities. This was because the FTT found that too much time had passed for such a statement to be reasonably required in the context of his self-assessment return from five years earlier;
  • varied the information notice for one of the companies to make clear that the credit card statements required for a director did not include statements for credit cards used purely personally;
  • varied the information notice for another company to remove the requirement to name the person who made an adjustment to the accounts after they had been filed with Companies House and HMRC;
  • upheld all other FA 2008, Sch. 36 notices in full;
  • ordered the closure of HMRC's enquiries into four CT returns within 30 days (one company was dormant in the relevant year, one company was a holding company in both years enquired into and one company was a property holding company, and for all HMRC had not met the burden of showing that the enquiries should have remained open);
  • did not direct the closure of any other enquiries; and
  • confirmed each of the three FA 2008, Sch. 36 fixed penalty notices.
Comment

HMRC wrote to the taxpayer advising that they were enquiring into his tax affairs under COP9, but the taxpayer “unequivocally and resolutely” denied that he had committed tax fraud and refused the offer of a Contractual Disclosure Facility (CDF). HMRC continued to investigate the taxpayer and associated entities and the taxpayer submitted that these enquiries and the many information notices issued were being used for the dominant purpose of enabling HMRC to obtain evidence to decide whether to prosecute him. The FTT disagreed and found that when the CDF was refused the HMRC officer was given authority to continue the case as a civil investigation, and based on the evidence it found that the dominant purpose was to run the COP9 civil investigation, it was not to gather evidence so as to prosecute the taxpayer. This did not mean that HMRC could not use material gathered from the enquiries and FA 2008, Sch. 36 notices as evidence, were the taxpayer to be charged with a criminal offence, but rather that any such use would be a secondary and incidental consequence. On all but a few points the taxpayer lost the appeal.

DECISION
Introduction and summary

[1] This decision encompasses the following appeals and applications (“the appeals and applications”):

  • applications to close enquiries opened by HM Revenue & Customs (HMRC) into the corporation tax (CT) returns of the corporate appellants (the Companies); into two self-assessment (SA) tax returns submitted by Mr Shamir Pravin Budhdeo (Mr Budhdeo); and into the partnership return of Symbio Energy LLP (Symbio) for the period ended 5 April 2013. In total there were 41 closure applications before the Tribunal;
  • appeals made by certain of the Appellants against Notices issued under Finance Act 2008, Schedule 36, paragraph 1 and by Symbio against a Notice issued under Finance Act 2008, Schedule 36, paras 1 and 2. In this decision, both types of Notice are called a Sch 36 Notice. There were 17 such Notices under appeal, each of which required one or more listed items (Item or Items); altogether 158 Items were listed; and
  • appeals against fixed penalties charged on Mr Budhdeo, Symbio and Noviscom Limited (Noviscom) for failure to comply with a Sch 36 Notice.

[2] At the time the appeals were notified to the...

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