Indigo Media Partnership
| Jurisdiction | UK Non-devolved |
| Judgment Date | 25 August 2015 |
| Neutral Citation | [2015] UKFTT 424 (TC) |
| Date | 25 August 2015 |
| Court | First Tier Tribunal (Tax Chamber) |
Judge Jonathan Cannan, Mr Roland Presho FCMA
Mr Robert Crawford, partner appeared for the Appellant
Mr Brendan Hone of HM Revenue & Customs appeared for the Respondents
Procedure – Whether appeal late – Applications for permission to notify late appeals – Discretion – Data Select Ltd v R & C Commrs [2012] BVC 1,743 and Re Petition of IR Commrs for Judicial Review [2006] BTC 846 applied – Applications refused.
The First-tier Tribunal (FTT) refused a taxpayer partnership permission to notify late appeals in respect of amendments made to the partnership's tax returns in relation to the availability of relief for expenditure on films. The FTT found the length of the delay in appealing and the absence of any good reason for that delay outweighed the other factors it considered.
Ingido Media Partnership (the appellant) invested in 11 films and made claims for relief in its 2000–01 and 2001–02 partnership tax returns under Finance (No 2) Act 1992, s. 42 and Finance (No 2) Act 1997, s. 48 (both now repealed). A closure notice was issued in respect of 2000–01 on 30 November 2007, but although an appeal against the amendment was notified to HMRC on 21 December 2007 it was not notified to the FTT until 30 March 2014 and was therefore four years and four months late. A closure notice was issued in respect of 2001–02 on 11 May 2012, an appeal was never notified to HMRC and was only notified to the FTT on 30 March 2014 and was therefore one year and nine months late. The closure notices effectively denied relief fully in respect of eight of the films, partially allowed relief for one film and fully allowed relief for two of the films. The FTT had to decide whether it should give permission to the appellant to notify late appeals for 2000–01 and 2001–02 and there was also a prior issue of whether the 2000–01 appeal was in fact in time.
The FTT found that the appellant sought to appeal the amendments to the partnership returns in March 2014 because of the arrest of the head of HMRC's specialist film anti-avoidance unit, Mr Duthie, who had been one of the officers dealing with the enquiries into the returns.
The FTT found that the appeal against the amendment to the partnership 2000–01 tax return was out of time. Although the appellant had notified the appeal to HMRC in time and had elected for the appeal to be heard by the Special Commissioners, the appeal was never notified to them. Prior to 1 April 2009 a notice of appeal disputing amendments made by a closure notice had to be given to HMRC within 30 days and then either party could serve notice to the Special Commissioners to fix a date for a hearing, with no time limit for when such a notice had to be given. Under the tribunal rules effective from 1 April 2009 notices of appeal still had to be given to HMRC within 30 days and then either there could be a statutory review by HMRC or the appellant could notify the appeal to the FTT, with various time limits applying. There were also transitional provisions applying to current proceedings, but these did not apply in this case.
HMRC claimed that the appeal against the 2000–01 amendment became the subject of a deemed agreement under the Taxes Management Act 1970 (TMA 1970), s. 54. This was on the basis that HMRC had offered to review the matter under TMA 1970, s. 49A(2)(b) and as the appellant had neither accepted the offer nor notified the appeal to the FTT, HMRC's view of the matter was to be treated as if it were contained in an agreement under TMA 1970, s. 54 and in accordance with TMA 1970, s. 49C(2) the appellant could not resile from that agreement. The FTT accepted these assertions, but noted that the effect of TMA 1970, s. 49H(3) was that even after the relevant deadline had passed an appellant could notify an appeal to the FTT if the FTT gave permission and therefore if such permission was granted the deemed agreement under TMA 1970, s. 54 would cease to have effect.
In relation to whether the FTT should grant permission to notify late appeals for 2000–01 and 2001–02, the FTT referred to the Court of Session case of Re Petition of IR Commrs for Judicial Review TAX[2006] BTC 846, and the Upper Tribunal cases of Data Select Ltd v R & C Commrs VAT[2012] BVC 1,743, Leeds City Council v R & C Commrs VAT[2014] BVC 531 and O'Flaherty v R & C Commrs TAX[2013] BTC 1,814, and decided that it had to take into account all the circumstances and ask itself: (1) what is the purpose of the time limit? (2) how long was the delay? (3) is there a good explanation for the delay? (4) what will be the consequences for the parties of an extension of time? And (5) what will be the consequences for the parties of a refusal to extend time. The FTT was not persuaded that the time for appealing the amendments to either partnership return should be extended. In particular the length of the delay and the absence of any good reason for that delay outweighed the other factors. The FTT concluded that the overriding objective was served by refusing the application.
The FTT accepted that the application for permission to notify late appeals had occurred because of the arrest of an HMRC official involved in the case (the head of HMRC's specialist film anti-avoidance unit, Mr Duthie), however the FTT noted that even if the arrest of Mr Duthie crystallised concerns over HMRC's dealings … in relation to the enquiries, we are not satisfied that provides a good reason for failing to appeal in the period after June 2013 when Mr Duthie's arrest was publicised.
[1] The Appellant is a partnership known as Indigo Media Partnership, comprising 17 individual partners. We shall refer to it either as the Appellant or the Partnership. Mr Robert Crawford is one of the partners and he appeared on behalf of the Appellant.
[2] In 2001 and 2002 the Appellant made certain investments in various films for which it claimed relief under section 42 Finance (No 2) Act 1992 (section 42) and section 48 Finance (No 2) Act 1997 (section 48). The claims were made in tax years 2000–01 and 2001–02. We describe the nature of those reliefs and the circumstances in which the Appellant came to claim relief in more detail below.
[3] The Appellant has applied for an extension of time in which to appeal against amendments made by way of closure notices following enquiries into the Partnership tax returns for tax years 2000–01 and 2001–02. The closure notice for tax year 2000–01 was issued on 30 November 2007. The closure notice for 2001–02 was issued on 11 May 2012.
[4] An appeal against the amendment to the Partnership tax return for 2000–01 was notified to HMRC on 21 December 2007. It was not notified to this tribunal until 30 March 2014. The appeal against the amendment to the Partnership tax return for 2001–02 was notified to this Tribunal on 30 March 2014. In both cases the substantive grounds of appeal may be summarised as follows:
1) HMRC had incorrectly identified the dates on which the Appellant was properly constituted and had commenced trading.
2) HMRC had incorrectly identified the dates on which expenditure had been incurred and the amount of qualifying expenditure.
3) As a matter of law, the revocation in 2007 of certain certificates issued by the Department of Culture, Media and Sport in 2001 could not affect relief for expenditure on films in tax years 2000–01 and 2001–02.
[5] The grounds of appeal also raise issues in relation to the statutory review procedure which we consider below.
[6] The issue before us is whether we should give permission to the Appellant to notify late appeals for each tax year. In relation to the amendment for tax year 2000–01 there is also a prior issue as to whether the appeal was in fact in time.
[7] The evidence before us for the purposes of these applications comprised two volumes of documentation. We did not hear any witness evidence. Save in relation to one matter referred to below there were no issues of fact.
[8] Both parties were content to proceed on the basis that the Appellant had at least a reasonable prospect of establishing entitlement to relief in relation to expenditure on films in 2000–01 and 2001–02. We do not therefore need to make any findings in relation to the underlying merits of the appeals.
[9] In the relevant tax years, relief by way of capital allowances was available under section 42 where production expenditure was incurred on a qualifying film or where expenditure was incurred on acquiring a qualifying film. The film must be certified as a British film by the Department for Culture, Media and Sport (DCMS). Section 42 had been modified by section 48. Expenditure on small qualifying films could be written off over a one year period rather than the original three year period. Otherwise relief would be available under the unmodified section 42.
[10] We understand that the appeals raise two broad issues. Firstly, the extent to which relief is available, if at all, under section 42. Secondly whether relief can be withdrawn if, some years later, the DCMS certificates are withdrawn.
[11] Before considering the statutory review and appeals procedure in the Taxes Management Act 1970 (TMA 1970) we should also briefly say something about the tax treatment of partnerships and individual partners.
[12] The scheme of the TMA 1970 involves the making of partnership returns by the partner or partners who are given notice by HMRC that they are required to do so. Any enquiry into a partnership return is commenced by a notice of enquiry to a partner who made the partnership return or his successor. Such an enquiry automatically opens an enquiry into all the partners' personal returns. The closure notice is given to the partner or partners to whom the notice of enquiry was given. Where an amendment to the partnership return is made, HMRC will...
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