O'Mullan (J.) & Company v Walmsley
| Jurisdiction | Northern Ireland |
| Judgment Date | 19 November 1965 |
| Date | 19 November 1965 |
| Court | Queen's Bench Division (Northern Ireland) |
QUEEN'S BENCH DIVISION (NORTHERN IRELAND)-
Income Tax - Back duty - Neglect - Whether assessment made "for the purpose of making good…a loss of tax…attributable to…fraud, wilful default or neglect" - Income Tax Act, 1952 (15 & 16 Geo. VI & 1 Eliz. II, c. 10), Section 47; Finance Act, 1960 (8 & 9 Eliz. II, c. 44), Sections 51 and 52.
The Appellants commenced trading in partnership as building contractors in April, 1945. They did not give notice to the Inspector of Taxes that they were chargeable to Income Tax until 13th June, 1956, when their accountant wrote to the Inspector, and up to that date no assessments had been made on their profits. An assessment to Income Tax under Schedule D in respect of the profits of the partnership for the year 1951-52 was made on 2nd April, 1958, and finally determined on 2nd February, 1962. On 29th March, 1962, assessments were made for the years 1945-46 to 1950-51, on the footing that tax for those years had been lost through the Appellants' fraud, wilful default or neglect. On appeal, the Special Commissioners found that the Appellants were guilty of neglect and held that the assessments were valid. The Appellants demanded a Case.
In the High Court in Northern Ireland it was contended for the Appellants that the assessments were not authorised by Section 51(3), Finance Act, 1960, for that the assessment for 1951-52 was not made for the purpose of making good a loss attributable to their fraud, wilful default or neglect within the meaning of Section 51(1). For the Crown it was contended that the requirements of Section 51(1) were satisfied by any assessment if the loss to the Crown of the tax assessed was in fact due to the taxpayer's fraud, wilful default or neglect.
Held, that Section 51(1) refers to an assessment made for the particular purpose of making good a loss of tax as therein described, and there was no evidence that the assessment for 1951-52 had been so made.
Stated under the Income Tax Act, 1952, Section 64, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the High Court of Justice in Northern Ireland.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 24th and 25th June, 1963, Mr. J. O'Mullan and his wife, trading in partnership as J. O'Mullan & Co., hereinafter called "the Appellants", appealed against the following assessments to Income Tax (Schedule D):
1945-46 |
… |
… |
… |
£600 |
|
1946-47 |
… |
… |
… |
£900 less |
£75 capital allowances |
1947-48 |
… |
… |
… |
£1,200 less |
£58 " " |
1948-49 |
… |
… |
… |
£1,400 less |
£45 " " |
1949-50 |
… |
… |
… |
£1,699 less |
£130 " " |
1950-51 |
… |
… |
… |
£1,966 less |
£541 " " |
(2) The said assessments were made on 29th March, 1962, i.e. later than six years after the end of the year to which each assessment related, and were supported by H.M. Inspector of Taxes under the provisions of Section 47(1) of the Income Tax Act, 1952, on the grounds of fraud or wilful default; as an alternative the Inspector supported the assessments under Sections 51 and 52 of the Finance Act, 1960, on the grounds of neglect.
(3) Shortly stated, the question for our decision was whether the assessments were validly made, it being common ground that they were not valid unless there had been fraud or wilful default or neglect on the part of the Appellants.
3. The following witnesses gave evidence before us:
(a) Mr. C.P.G. Hamilton, one of H.M. Inspectors of Taxes;
(b) Mr. J.C. Erskine, one of H.M. Inspector of Taxes;
(c) Mr. J. O'Mullan;
(d) Mrs. J. O'Mullan.
4. The following documents were proved or admitted before us:
(2) A statement of the Appellants' affairs as at 23rd September, 1948.
(3) A trading and profit and loss account for the period from 23rd September, 1948, to 31st August, 1949.
(4) Trading and profit and loss accounts for each of the five years ending 31st August, 1950, to 31st August, 1954, inclusive.
(5) A trading and profit and loss account for the period from 1st September, 1954, to 21st September, 1955.
(6) A trading and profit and loss account for the period from 22nd September, 1955, to 30th September, 1956.
(7) A balance sheet as at 30th September, 1956.
(8) A bundle of correspondence between the Appellants' accountant and H.M. Inspector of Taxes (put in on behalf of the Appellants).
(9) A bundle of correspondence between H.M. Inspector of Taxes and the Appellants' accountant (put in by H.M. Inspector of Taxes).
(10) A remittance card relating to Income Tax, P.A.Y.E., for the year 1954-55.
(11) A blank form P.45.
(12) A blank tax deduction card.
Copies of the above are not annexed hereto as exhibits but are available for inspection by the Court if required.
5. As a result of the evidence both oral and documentary adduced before us we find the following facts proved or admitted:
(2) Mr. O'Mullan commenced business on his own account as a building and civil engineering contractor in April, 1942. Before that date he had been ill for about a year, but prior to his illness he had been employed by other persons and he had paid Income Tax as an employee in respect of those earlier periods.
(3) Mr. O'Mullan married on 2nd April, 1945. His wife, prior to the marriage, had been a schoolteacher and as such she had paid Income Tax. Immediately after the wedding they entered into a partnership in respect of the business, the partners being the husband and wife, trading as J. O'Mullan & Co.
(4) The Appellants did not give any notice to the Inspector of their chargeability to Income Tax. No Income Tax returns were issued to the Appellants requiring them to make a return of their income, and no assessments were made upon the Appellants in respect of their business profits, until after 13th June, 1956, when Mr. Noel P. Buggy, who is a certified accountant, wrote a letter to the Inspector as follows:
I have been consulted by Mr. & Mrs. John O'Mullan trading as "John O'Mullan" Building Contractors at Cloughmills, Co. Antrim. Accounts are in the course of preparation and I will write you further later. Meantime I would be glad if you would please let me have Return Forms for the past years.
(5) Income Tax under Schedule A on property has been paid by the Appellants since 1952-53.
(6) In due course Mr. Buggy submitted to H.M. Inspector of Taxes various statements relating to the Appellants' financial affairs. A list of these documents is set out in para. 4 of this Case. As at 23rd September, 1948, the Appellants' capital accounts amounted to approximately £5,400; as at 30th September, 1956, their capital accounts amounted to approximately £19,000. No precise statement of capital was available as at the date of commencement of the partnership in April, 1945, but the profits for the period from April, 1942, to September, 1948, amounted to more than £6,000.
(7) H.M. Inspector of Taxes raised an assessment on the partnership in respect of its business profits for the year 1951-52 on 2nd April, 1958 (i.e. within the time limit of six years). That assessment was not in dispute before us.
(8) In their oral evidence before us both Mr. O'Mullan and Mrs. O'Mullan, in reply to a question put to each of them, said that it did not occur to them that they ought to be paying Income Tax. Mrs. O'Mullan added, "It never dawned on me". We did not believe those replies. Here were two people, one of whom had been a schoolteacher and the other was a very competent business man, who could not possibly be said to be ignorant of the fact that Income Tax was payable in Northern Ireland in the relevant years; indeed they had deducted Income Tax, under P.A.Y.E., from the wages of a number of their employees during the relevant years. We found as a fact that, at the least, the Appellants were guilty of neglect, within the definition contained in Section 63 (1), Finance Act, 1960, for all relevant years in failing to notify H.M. Inspector of Taxes of the chargeability to tax in respect of the partnership profits as required by statute.
6. We had rejected a submission made on behalf of...
To continue reading
Request your trial
-
Thurgood v Slarke
......Birmingham Waterworks Co. (1856) 11 Ex. 781 O'Mullan v. Walmsley TAX (1965) 42 T.C. 573 13. The Commissioners retired, and when they ... 27th May 1970. The case came before Plowman J. in the Chancery Division on 24th and 25th March 1971, when judgment was ......
-
Thurgood v Slarke (HM Inspector of Taxes)
...14 App. Cas. 337;Bennett v. Stone ELR[1903] 1 Ch. 509Blyth v. Birmingham Waterworks Co. (1856) 11 Ex. 781O'Mullan v. Walmsley TAX(1965) 42 T.C. 573 13. The Commissioners retired, and when they returned the chairman said the Commissioners found fraud or wilful default was not established but......