Mathers
| Jurisdiction | UK Non-devolved |
| Judgment Date | 11 September 2014 |
| Neutral Citation | [2014] UKFTT 893 (TC) |
| Date | 11 September 2014 |
| Court | First Tier Tribunal (Tax Chamber) |
[2014] UKFTT 893 (TC)
Judge Howard M. Nowlan, Mr Charles S. Baker
Michael Edhouse of MJ Edhouse & Co, accountants, appeared on behalf of the Appellant
Christine Cowen of HMRC appeared on behalf of the Respondents
Income tax - Application to appeal to the First-tier Tribunal out of time - Application refused.
[1]This was an Application by Mr. Aeron Mathers ("Mr. Mathers") to appeal out of time against the assessments and penalties in respect of income for the tax years 2003/4 to 2006/7. The Application was strongly resisted by HMRC. The only question for us to decide was whether we should grant Mr. Mathers' Application to appeal out of time (we might immediately add, very seriously out of time), rather than to consider the merits of any possible appeal. It was obviously appropriate, however, to seek to understand the history, including thus the points that remained in dispute as well as the various delays and disputes that had already been a feature of this enquiry by HMRC into the various tax years. On our calculation, the total amount at stake, including additional tax and penalties, was the significant sum of 53,393.58.
[2]In this Decision, we will deal separately with:
some indication of the various points that either have been, or that remain, in dispute;
a summary of the stages and delays in progressing this dispute, and the matters therefore material to the delay in applying to appeal to the Tribunal;
our understanding of the tests that we should consider in dealing with this application to appeal out of time; and
our Decision.
[3]Mr. Mathers had been a plumber. It seemed that much of his work consisted of fitting bathrooms for B&Q on a sub-contract basis when B&Q has contracted to sell a fully-fitted bathroom to a customer. Mr. Mathers had suffered some accident, presumably at some time in 2003, with the result that he suffered severe pain and was unable to undertake as much of the fitting work as he normally undertook. Accordingly, his profit for the period 2003/4 was much less than it had been in earlier years, since he had had to sub-contract much more of the work to others rather than do the work himself. It was this reduction in profit that led HMRC to undertake an enquiry into the relevant return.
[4]The calculation of the profits as a plumber remained one of the points in dispute, because HMRC were disallowing many claimed costs as many appeared to be estimates, and the actual invoices for materials costs and certificates from sub-contractors were not available. We understand that many of Mr. Mathers' papers, including invoices and receipts, were said to have been destroyed when a tenant in one of the properties that we will mention shortly packed Mr. Mathers' belongings in a house that had been let to the tenant into a black plastic bag and, after a period, threw away the plastic bag and contents. The various certificates from sub-contractors had apparently been furnished to B&Q and no copies retained.
[5]Following his injury, and in view of other health problems, it seems that Mr. Mathers largely gave up the plumbing business and turned his attention to property investment and to letting properties. Three categories of property were mentioned to us during the hearing. The first were some chalet bungalows, presumably very near the sea, either in or close to Clacton. The second category were three houses in Hemel Hempstead that had been sub-divided with each floor being let to a tenant, and some of the facilities being shared. The third property was one in Cyprus.
[6]HMRC had been suspicious that rental must have been concealed in relation to the Clacton properties. They had apparently been inherited by him, or given to him, and they were said to have been in a poor state. They were very small wooden structures, looking like seaside chalets. We were never given the detail but they seemed to have been let to some housing trust (with which it was possible that Mr. Mathers was connected) at a rent of 100 a year for each of the five properties, i.e. 500 in total. The deal seemed to be that the trust would improve the properties, whereupon Mr. Mathers would presumably benefit on the expiry of the leases. We could not possibly consider whether any undertakings to improve the properties might constitute deemed premiums, a proportion of which might rank as income, because we were given no detail of the length of term of the leases or the terms of any obligation to undertake work. It did however seem that the properties were now worth roughly 30,000 each, though whether and when Mr. Mathers might either acquire vacant possession or be able to re-set the rents was never mentioned.
[7]There had been a number of disputes between Mr. Mathers and HMRC in relation to the Hemel Hempstead properties. Some had been resolved between the parties even prior to HMRC reviewing the officer's original decision on closing the enquiry, but other disputes remained, largely in relation to estimated costs for repairs and maintenance. One particular claim related to a deduction claimed for 5,000 on refurbishing a kitchen, which HMRC had disallowed either or both because they were questioning whether the expenditure was capital or income, and because there were again no invoices or other proof of the costs having been incurred.
[8]The Cyprus property was of a different nature. HMRC had seen web pictures of the various properties after they had been built, one of which they had assumed that Mr. Mathers owned, and when no rent had been declared in respect of it, they assumed that rent had simply been concealed. This emerged not to be the case. Mr. Mathers had simply bought an option or contract to acquire one of the properties before they had been built, and had then paid two or three further calls for further amounts during the building period. When the properties were completed, and the final call was made for the balance of the price, Mr. Mathers was unable to afford that call and therefore sold...
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