King v United Kingdom (13881/02)
| Jurisdiction | England & Wales |
| Judgment Date | 23 March 2000 |
| Date | 23 March 2000 |
| Court | Special Commissioners (UK) |
special commissioners decision
MR THEODORE WALLACE; DR A N BRICE
Practice and procedure - Penalties - Whether 1991 findings of Special Commissioners final and conclusive - Whether appellant negligently made incorrect returns or statements - Whether penalties should be set aside, confirmed or revised - Taxes Management Act 1970 section 46 subsec-or-para (2) section 95 section 100B section 101 section 102Taxes Management Act 1970 s 46(2), 95, 100B, 101, 102 - Interest - Whether 1991 findings of Special Commissioners final and conclusive - Whether loss of tax attributable to wilful default or neglect - Whether determination of interest should be set aside, confirmed or revised - Taxes Management Act 1970 section 46 subsec-or-para (2) section 88 section 88A section 118 subsec-or-para (1)Taxes Management Act 1970 s 46(2), 88, 88A, 118(1) - Further assessments - Outside ordinary time limits - Whether 1991 findings of Special Commissioners final and conclusive - Whether loss of tax attributable to wilful default or negligent conduct - Whether assessments should be reduced or increased - Taxes Management Act 1970 section 29 section 36 section 37 section 46 subsec-or-para (2) section 50Taxes Management Act 1970 s 29, 36, 37, 46(2), 50
1. Mr James Murray King ("the Appellant") appeals against:
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(2) a determination dated 13 December 1991 that tax and Class 4 national insurance contributions charged by a number of assessments from 1972/73 to 1985/86 should carry interest from specified dates on which the tax ought to have been paid until payment; payment was made on 6 February 1997 and on 9 September 1998 the Appellant was informed that the amount of the interest was £82,808.35;
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(3) a determination dated 17 October 1994 that the Appellant was liable to penalties amounting to £54,270 in respect of income tax and national insurance contributions; and
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(4) nine further assessments issued on 4 April 1996 for the years 1977/78 to 1985/86 inclusive; the total amount of tax assessed by all nine assessments is £58,600.
2. The hearing of these appeals occupied all or part of seventeen days. We summarise the progress of the hearing, and the Directions which we gave during its course, in Annex A to this Decision.
3. These appeals follow determinations by a different panel of Special Commissioners on 18 November 1991 ("the 1991 Decision"), after hearings extending over eighteen days. The 1991 Decision was affirmed by the High Court ([1994] BTC 44) and the Court of Appeal ([1996] BTC 199; 68 TC 387); the decision of the Court of Appeal was given on 4 October 1995.
4. In summary, the 1991 Decision related to assessments for fourteen years ("the original assessments"). It decided that the Appellant was assessable in respect of profits of the trade of guest house proprietor for the thirteen years from 1973/74 to 1985/86 amounting in total to £123,900 and that the Appellant was assessable in respect of bank interest in the thirteen years from 1972/73 to 1984/85 amounting in total to £1,133 (of which £96 was discharged by the High Court). For some assessments the Special Commissioners, Mr B O'Brien and Mr T H K Everett, found wilful default; for others they found neglect; and for others there were no findings of wilful default or neglect.
5. The determinations of interest and penalties now under appeal follow the 1991 Decision; the penalties imposed are 80 per cent of the tax lost.
6. In 1995 the Inland Revenue discovered that in 1983 a property called Roundwood Lodge had been purchased in the Appellant's name. The 1991 Decision was based on a statement of the Appellant's capital assets which did not include Roundwood Lodge. The further assessments were made on the basis that the funds required to purchase Roundwood Lodge, and to pay its outgoings, represented additional profits of the Appellant's trade as a guest house proprietor for the years of assessment 1977/78 to 1985/86. The Appellant's case was that the guest house profits were not his; that Roundwood Lodge was not his; and that there had been no wilful default or neglect.
7. The Respondent informed us during the hearing that no further penalties or interest would be imposed in respect of the tax due on the further assessments.
8. The details of the relevant legislation are considered later, within the context of the issues to which they relate, but a summary is given here.
9. The legislation relating to appeals is contained in Taxes Management Act 1970 section 44Part V (sections 44 to 59) of the Taxes Management Act 1970 ("the Management Act"). Taxes Management Act 1970 section 46 subsec-or-para (2)Section 46(2)provides that a determination of the General or Special Commissioners is final and conclusive. Taxes Management Act 1970 section 46 subsec-or-para (2)Section 46(2) applies to all three appeals (namely, the appeals against the interest, the penalties and the further assessments).
10. The legislation relating to interest is contained in Part IX (Taxes Management Act 1970 section 86sections 86 to 92) of the Management Act. At the relevant time, Taxes Management Act 1970 section 88section 88 provided that an assessment made for the purpose of making good a loss of tax attributable to fraud, wilful default or neglect carried interest from the date on which the tax ought to have been paid until payment;Taxes Management Act 1970 section 88Asection 88Aprovided that the appeal commissioners could set aside, confirm or revise the determination.
11. The legislation relating to penalties is contained in Part X (Taxes Management Act 1970 section 93sections 93 to 107) of the Management Act. Taxes Management Act 1970 section 95Section 95 provides that where a person fraudulently or negligently makes an incorrect return or statement he is liable to a penalty. Taxes Management Act 1970 section 100BSection 100B provides that the appeal commissioners can set aside, confirm, reduce or increase the penalty. Taxes Management Act 1970 section 101Section 101 provides that, for the purposes of Part X, an assessment which can no longer be varied shall be sufficient evidence that the income charged therein arose. Thus Taxes Management Act 1970 section 101section 101 applies only to the appeal against the penalties.
12. The legislation relating to the further assessments is contained in Part IV (Taxes Management Act 1970 section 28Asections 28A to 43B) of the Management Act. At the relevant time, Taxes Management Act 1970 section 29 subsec-or-para (3)section 29(3)provided that, where an inspector discovered that profits which ought to have been assessed to tax had not been assessed, he might make an assessment in the amount which ought in his opinion to be charged. The ordinary time limit was six years. For years of assessment up to 1982/83, Taxes Management Act 1970 section 36section 36 provided that there was no time limit for making assessments where any form of fraud or wilful default had been committed andTaxes Management Act 1970 section 37section 37provided that there was a limit of twelve years where there was a loss of tax due to neglect. For years of assessment after 1983/84,Taxes Management Act 1970 section 37section 37 was repealed and Taxes Management Act 1970 section 36section 36, as amended, provides that an assessment to make good a loss of tax attributable to fraudulent or negligent conduct may be made within twenty years. Taxes Management Act 1970 section 50Section 50 (which is in Part V) provides that, on appeal, the appeal commissioners may reduce or increase an assessment.
13. At the relevant time the legislation relating to national insurance contributions was contained in Social Security Act 1975 section 9section 9 of the Social Security Act 1975. Social Security Act 1975 section 9 subsec-or-para (3)Section 9(3)provided that all the provisions of the Income Tax Acts, including provisions as to assessment, collection, repayment and recovery, and the provisions of Taxes Management Act 1970 part xPart X of the Management Act relating to penalties should apply to Class 4 contributions as if they were income tax chargeable under Case I or Case II of Schedule D. Social Security Act 1975 schedule 2 subsec-or-para 7Paragraph 7 of Schedule 2 provided thatTaxes Management Act 1970 section 88section 88 of the Management Act relating to interest should apply in respect of Class 4 contributions as it applied in relation to income tax andSocial Security Act 1975 schedule 2 subsec-or-para 8paragraph 8 of Schedule 2 provided that, where an assessment had become final and conclusive for the purposes of income tax for any year, that assessment should also be final and conclusive for the purposes of computing liability for Class 4 contributions.
14. The Inland Revenue do not allege fraud against the Appellant. Accordingly, the issues for determination in the appeals are:
As concerns the interest:
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(2) whether, as a result of Taxes Management Act 1970 section 46 subsec-or-para (2)section 46(2), the findings by the Special Commissioners in the 1991 Decision of (a) the purpose of the original assessments, (b) wilful default and neglect and (c) the amount of income assessable, are final and conclusive;
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(3) whether, in relation to each of the years for which there are no binding findings of wilful default or neglect, the original assessments were made for the purpose of making good a loss of tax attributable to wilful default or neglect within the meaning of Taxes Management Act 1970 section 88section 88; and
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(4) whether the determination of interest should be set aside because the tax carries no interest, or whether it should be confirmed or revised under Taxes Management Act 1970 section 88Asection 88A.
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(5) As concerns the penalties:
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(6) whether, as a result of Taxes...
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Kamran
...which accompanies and forms part of this decision notice. APPENDIX The Special Commissioners' findings of fact in King v Walden (HMIT) (2000) Sp C 235 We now take up again the history of the purchase of 10 Fielding Terrace (and its business). Towards the end of 1972, Mr King paid a visit to......
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Stockler
...findings of fact on which I should base my decision. To some extent, I accept this submission also. However, in King v Walden (HMIT)SCD(2000) Sp C 235, the Special Commissioners when considering penalties under Taxes Management Act 1970 section 95s 95 TMA 1970 referred at paragraph 154 to t......
- King v Walden (Inspector of Taxes)