Hanan v R & C Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 22 June 2020 |
| Neutral Citation | [2020] UKUT 194 (TCC) |
| Date | 22 June 2020 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2020] UKUT 194 (TCC)
Upper Tribunal (Tax and Chancery Chamber)
Judge Jonathan Richards, Judge Guy Brannan
Income tax – Whether subsequent grant of permission to notify a late appeal against an information notice invalids a penalty imposed for non-compliance with that information notice – No – Appeal dismissed.
[1] This appeal involves points of detail arising out of the legislation set out in Schedule 36 of Finance Act 2008 (“Schedule 36”) that permits HMRC to issue information notices requiring taxpayers to provide them with specified information and documents and to charge penalties where a taxpayer fails to comply with an information notice. Very broadly, Mr Hanan received an information notice, appealed to HMRC against it and requested, and obtained, a review of HMRC's decision. He did not notify his appeal to the First-tier Tribunal (the “FTT”) within applicable time limits and, in December 2016, HMRC imposed a penalty in respect of his failure to comply with the information notice. Mr Hanan appealed against the penalty and also obtained permission from the FTT to notify his appeal against the information notice late. The FTT released its decision on both the information notice and penalty notice appeals in December 2018 and, in the information notice appeal, the FTT approved the notice with some minor amendments. The question raised by these proceedings is whether HMRC were entitled to rely on the penalty assessment imposed in December 2016 in circumstances where, as events transpired, it was only in December 2018 that the FTT adjudicated on the validity of the information notice.
[2] Prior to the hearing, we asked the parties for their views on the appropriate format for the hearing. HMRC submitted that the hearing should take place “remotely”, either by telephone or video-conference. Mr Hanan argued that the hearing should be postponed until such time as it was practicable for it to take the form of a “face to face” hearing at which all parties were physically present at the same location. In Directions released on 18 May 2020 we decided that the hearing would take the form of a fully remote audio hearing at which all parties participate from separate locations by telephone and we gave reasons for that decision. We will not repeat those reasons in this decision.
[3] To put the issue in context, we start with a summary of the applicable statutory scheme as applicable to the information notice that Mr Hanan received. References in square brackets are to paragraphs of the decision (the “Decision”) that is under appeal, namely Hanan [2019] TC 06898.
[4] Paragraph 1 of Schedule 36 permits HMRC to issue information notices requiring taxpayers to provide documents or information within such reasonable period as is specified in the notice (paragraph 7 of Schedule 36). On 12 November 2015, HMRC sent Mr Hanan such an information notice requiring him to provide documents and information relating to 37 points set out in a schedule ([4]). HMRC initially required Mr Hanan to provide the documents and information by 14 December 2015, but then agreed to extend that deadline to 19 February 2016.
[5] Since HMRC had not obtained advance approval of the information from the FTT, and since the information notice did not seek only “statutory records”, paragraph 29 of Schedule 36 gave Mr Hanan a right of appeal against the information notice. That right of appeal had to be exercised by giving notice of appeal to HMRC. By paragraph 32 of Schedule 36, Mr Hanan had 30 days beginning with the date the information notice was given to appeal to HMRC the information notice. Mr Hanan did not meet that deadline. However, he appealed to HMRC against the information notice (late) on 1 March 2016 ([5]).
[6] By paragraph 32 of Schedule 36, the provisions of the Taxes Management Act 1970 (“TMA”) relating to appeals were applied to Mr Hanan's appeal against the information notice. That meant that, under s49(2) of TMA, HMRC had power to accept Mr Hanan's late appeal against the information notice. HMRC exercised that power and, on 16 June 2016, HMRC accepted that late appeal and explained their “view of the matter”, namely that the information notice should stand as issued.
[7] HMRC's letter of 16 June 2016 offered Mr Hanan a review of that decision which he accepted. On 12 October 2016, HMRC notified Mr Hanan of the outcome of that review. That review concluded ([6]) (i) that the information notice was validly issued (ii) that Mr Hanan had provided information on 19 of the items set out in the schedule to that notice and so information and documents relating to those matters would be removed from the information notice and (iii) that some amendments would be made to the request for documents and information relating to the remaining 18 items. HMRC's review decision attached an “Appendix A” setting out the scope of the information and documents required in respect of those 18 matters and stated that Mr Hanan had 30 days from the date of the review decision (until 11 November 2016) to provide the information and documents set out in that Appendix A. HMRC subsequently agreed to extend that deadline to 2 December 2016 ([7]).
[8] By s49G of TMA, Mr Hanan had until 11 November 2016, 30 days from the date of HMRC's review decision, to notify his appeal against the information notice to the FTT. He did not meet that deadline. Accordingly, by virtue of s49F of TMA, the conclusions set out in HMRC's review fell to be treated as if they were an agreement in writing under s54(1) of TMA settling the appeal against the information notice. Section 54(1) of TMA in turn provides that, where an appeal is settled by agreement:
… the like consequences shall ensue for all purposes as would have ensued if, at the time when the agreement was come to, the tribunal had determined the appeal and had upheld the assessment or decision without variation, had varied it in that manner or had discharged or cancelled it, as the case may be.
[9] Pursuant to paragraph 39 of Schedule 36, if Mr Hanan did not comply with the information notice by any extended deadline that HMRC had agreed (paragraph 44 of Schedule 36), he was liable to a civil 1penalty of £300.
[10] Paragraph 46 of Schedule 36 sets out requirements that HMRC must satisfy in order to impose a penalty under paragraph 39 which is at the heart of this appeal and provides, so far as relevant:
(1) Where a person becomes liable for a penalty under paragraph 39 …
- HMRC may assess the penalty, and
- if they do so, they must notify the person.
(2) An assessment of a penalty under paragraph 39 … must be made within the period of 12 months beginning with the date on which the person became liable to the penalty, subject to sub-paragraph (3).
(3) In a case involving an information notice against which a person may appeal, an assessment of a penalty under paragraph 39 or 40 must be made within the period of 12 months beginning with the latest of the following–
- the date on which the person became liable to the penalty,
- the end of the period in which notice of an appeal against the information notice could have been given, and
- if notice of such an appeal is given, the date on which the appeal is determined or withdrawn.
[11] Since Mr Hanan had a right of appeal against the information notice, the relevant period within which HMRC had to assess the penalty was given by paragraph 46(3). On 5 December 2016, having formed the view that Mr Hanan had not complied with the information notice as varied following their review, HMRC assessed Mr Hanan to a penalty of £300 ([8]).
[12] By paragraph 47 of Schedule 36, Mr Hanan had a right of appeal against the penalty with paragraph 48 requiring that he give notice of an appeal to HMRC in the first instance. On 7 December 2016, Mr Hanan made an in-time appeal to HMRC against the penalty.
[13] On 17 January 2017, HMRC set out their “view of the matter” in relation to the penalty appeal, namely that the penalty should stand. They offered Mr Hanan a review of that decision, which he accepted. On 28 February 2017, HMRC notified Mr Hanan of the outcome of that review which left the penalty unaltered.
[14] By s49G of TMA, Mr Hanan had 30 days from 28 February 2017, the date of HMRC's review decision, to notify his appeal against the penalty to the FTT. He did not meet that deadline. Therefore, Mr Hanan's appeal against the penalty was treated as settled by agreement, under s54 of TMA, on the terms of HMRC's review decision in the same way as his appeal against the information notice.
[15] On 5 May 2017, later than the permitted deadline as we have noted, Mr Hanan notified his appeal against the penalty to the FTT. The Decision refers, at [13], to the FTT giving permission (under s49G(3) of TMA) for the penalty appeal to be notified late. The effect of the FTT giving that permission was that the penalty appeal was, by s49F(4), of TMA no longer treated as settled by agreement under s54 of TMA.
[16] Mr Hanan's grounds of appeal against the penalty raised a number of criticisms of the information notice. To enable those criticisms to be addressed, HMRC suggested to Mr Hanan ([14]) that he should also notify to the FTT his appeal against the information notice. Mr Hanan followed that advice and, on 22 March 2018, more than 16 months after the deadline specified by s49G of TMA, Mr Hanan notified his appeal against the information notice to the FTT. Since the notification of the information notice appeal was late, Mr Hanan needed the permission of the FTT under s49G(3) of TMA.
[17] Mr Hanan's appeals against both the information notice and the penalty came before the FTT on 29 October 2018. At the hearing before the FTT, HMRC did not oppose the FTT exercising its discretion under s49G(3) of TMA to permit Mr Hanan to notify his...
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Ronnie Hanan v The Commissioners for HM Revenue and Customs
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