Kington (HM Inspector of Taxes) v Reilly
| Jurisdiction | Scotland |
| Judgment Date | 07 November 1980 |
| Date | 07 November 1980 |
| Court | Court of Session (Inner House - First Division) |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
Sub-contractors in the construction industry - Certificate of exception - Appeal against Inspector's refusal of certificate - Jurisdiction of Commissioners on appeal - Finance (No. 2) Act 1975, s 70 and Part I of Sch 12.
The taxpayer was a sub-contractor in the building industry. He applied for a certificate under s 70 of the Finance (No. 2) Act 1975, having engaged an accountant to try to put his tax affairs in order.
The Inspector refused the application because the taxpayer had failed to comply with his tax obligations (such compliance was required by para 3(1) of Part I of Sch 12 to the 1975 Act) and because for the purposes of para 7 he had reason to expect that the taxpayer would not do so in the future. The taxpayer appealed.
The General Commissioners (apparently assuming they had powers under para 3(2)) held that he was entitled to a certificate even though he had not met the requirements of Part I of Sch 12. The Crown appealed.
Held, in the Chancery Division, allowing the Crown's appeal, that the only power conferred on the Commissioners was to decide whether the conditions in Sch 12 were satisfied at the relevant time. Kirvell v. Guy 52 TC 445 followed.
Stated under s 56, Taxes Management Act 1970, by the Commissioners for the General Purposes of the Income Tax Acts for the Division of Prestatyn in the County of Clwyd for the opinion of the High Court of Justice.
1. At a meeting of the Commissioners for the General Purposes of Income Tax for the Division of Prestatyn held at the Council Offices, Nant Hall Road, Prestatyn, on 18 June 1979, Mr. Peter Joseph Reilly (hereinafter called "the Respondent") appealed against the refusal by the Inspector of Taxes to issue to him a construction industry sub-contractor's certificate of exemption under the provisions of s 70, Finance (No. 2) Act 1975.
2. The question for our decision was whether or not the Respondent should be treated as satisfying the conditions of paras 3(1) and 7 of Part I of Sch 12 to the said Act in view of the provision in para 3(2) of Part I of the said Schedule.
3. The following persons were present at the meeting: the Respondent, Peter Joseph Reilly, his accountant, Mr. B. Taylor, chartered accountant of Messrs. B. Taylor & Co., Rhyl, R.F. Kington, District Inspector of Taxes Rhyl and Mr. T.O. Davies, H.M. Inspector of Taxes, Rhyl.
4. The dates relevant to the present application were as follows: application submitted on 22 March 1979; application formally refused by the Inspector on 30 April 1979; appeal against refusal lodged by Mr. Taylor on 25 May 1979.
A previous application had also been formerly refused and the Commissioners had rejected the subsequent appeal on 9 January 1978.5. No formal evidence was given before us but the Inspector of Taxes produced to us a statement in which were set out certain facts which we were told were some of the facts which led him to refuse the application for a certificate. The facts as recorded in the statement were not disputed and we find the following facts as therein stated admitted or proved:
(2) Capital Gains Tax. Mr. Reilly and his wife disposed of their interest in Janmar Ltd., in the year ended 5 April 1974. The resulting capital gains should have appeared on the Respondent's tax return for 1974-75 but the return was not received. A duplicate was issued in April 1976 and despite a specific request for information about the disposal in June 1976 no response was forthcoming. It was necessary to raise an estimated assessment and this was not settled until late in 1977. A county court judgment for £577.08 and interest and county court costs were obtained on 22 May 1978.
(3) Rhyl Construction Co. Ltd. This company was incorporated in January 1974 and the Respondent was chairman and director and in effect its principal. The only accounts ever received were those for the year to January 1976, although trading appears to have continued until at least June 1977 when the Respondent commenced trading on his own account. An application for an exemption certificate was refused on 15 June 1977 (to which there was no appeal). In 1976 the Revenue's own auditors visited the said company and discovered evidence of irregularities regarding payments to casual employees and sub-contractors. It proved impossible to negotiate a settlement of these liabilities with the company and in July 1977 assessments were raised under s 29(5) of the Finance Act 1971, to recover tax amounting to £1,812 which should have been deducted from sub-contract payments. This tax was never recovered. In addition, there was evidence that PAYE had not been applied...
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