Nuttall v Barrett
| Jurisdiction | England & Wales |
| Judgment Date | 24 January 1992 |
| Date | 24 January 1992 |
| Court | Chancery Division |
Chancery Division.
Jonathan Parker J.
The taxpayer appeared in person.
Alison Foster (instructed by the Solicitor of Inland Revenue) for the Crown.
The following cases were referred to in the judgment:
Amis v Colls (HMIT) TAX(1960) 39 TC 148
Barnes Sherrocks v McIntosh (HMIT) TAX[1989] BTC 318
Neely v Rourke (HMIT) TAX[1987] BTC 32
Sparks v West Brixton General Commrs & Ors UNK[1977] STC 212
Default interest - Estimated assessment - Further assessment raised when inspector discovered true position - Taxpayer had not disclosed amount of gain until discovered by inspector - Whether taxpayer guilty of wilful default or neglect - Whether general commissioners justified in issuing certificate for default interest - Taxes Management Act 1970 section 70 subsec-or-para (3) section 88 subsec-or-para (1)Taxes Management Act 1970, sec. 70(3), 88(1).
This was an appeal by the taxpayer against a determination of the general commissioners for Outer Liverpool confirming a further assessment to capital gains tax and against the issue of a certificate for default interest under the Taxes Management Act 1970, Taxes Management Act 1970 section 70 subsec-or-para (3) section 88 subsec-or-para (1)sec. 70(3) and 88(1).
The taxpayer purchased a property in a dilapidated condition on 27 September 1979 for £3,360 and sold it on 5 September 1984 for £25,000. He converted the building for letting as factory/industrial units and declared rents received in his tax returns for the years ending 5 April 1982, 1983 and 1984.
The taxpayer's accountant declared a disposal of the property but gave no details, simply saying "to be agreed". The inspector issued an estimated assessment for capital gains tax in the sum of £10,000 under the Taxes Management Act 1970 section 29 subsec-or-para (1)Taxes Management Act 1970, sec. 29(1)(b) which was accepted by the taxpayer through his accountant. The taxpayer had not been able to locate details of any particular expenditure incurred in the renovation of the property but in a letter to the inspector the taxpayer's accountant stated that on a rough calculation the assessment seemed to be reasonable.
In 1988, following an enquiry, the inspector discovered the actual figures of the acquisition and disposal of the property. He sent a revised computation to the taxpayer with a letter inviting him to submit a claim for deductible expenditure. No such claim was made and a further assessment was issued in the sum of £10,264.
The general commissioners dismissed the taxpayer's appeal against the further assessment and issued a certificate for interest under theTaxes Management Act 1970 section 70 subsec-or-para (3)Taxes Management Act 1970, sec. 70(3) on the footing that the assessment was made to make good to the Crown a loss of tax attributable to the wilful default or neglect of the taxpayer withinTaxes Management Act 1970 section 88 subsec-or-para (1)sec. 88(1).
The taxpayer appealed to the High Court. He contended that certain documents relating to proposed expenditure (but not actual expenditure) which had been before the commissioners were referred to in a draft case but omitted from the case stated as eventually signed and that he had not been guilty of wilful default or neglect.
Held, dismissing the taxpayer's appeal on both points:
1. The documents which were omitted from the case stated would not have advanced the taxpayer's case. He had not discharged the burden imposed by the Taxes Management Act 1970 section 50 subsec-or-para (6)Taxes Management Act 1970, sec. 50(6) by satisfying the commissioners that he had incurred the expenditure which he claimed.
2. The commissioners could reasonably have concluded that the taxpayer, having failed to return any details of acquisition and disposal of the property until the inspector discovered the true position, was guilty of wilful default within Taxes Management Act 1970 section 88sec. 88 of the 1970 Act.
1. At a meeting of the commissioners for the general purposes of the income tax for the division of Outer Liverpool held on Wednesday 21 June 1989 Roland Nuttall ("the taxpayer") appealed against a further assessment for capital gains tax in the sum of £10,264 for the year ending 5 April 1985 and an application was made by the inspector of taxes for an interest certificate under Taxes Management Act 1970 section 70 subsec-or-para (3) section 88sec. 70(3) and 88of the Taxes Management Act 1970.
2. Shortly stated, the questions for our determination were as follows:
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(a) Whether the further assessment in the sum of £10,264 for the year ending 5 April 1985 was excessive in relation to the chargeable gain realised upon the sale of the taxpayer's property 97 Balliol Road, Bootle, Merseyside ("the property") having regard to expenditure alleged to have been incurred on the renovation of the property and deductible under Capital Gains Tax Act 1979 section 32 subsec-or-para (1)sec. 32(1)(b) of the Capital Gains Tax Act 1979.
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(b) Whether there had been a loss of tax to the Inland Revenue due to the taxpayer's wilful default or neglect.
3. The inspector appeared in person and the taxpayer was represented by his accountant, Mr P N Quaile of Paul G Burgess and Co, chartered accountants of 259 Wallasey Village, Wallasey.
4. The following documents, which are available for inspection by the court if required, were either proved or admitted before us:
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(a) The taxpayer's return for the year ending 5 April 1986.
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(a) A bundle of correspondence between the Inland Revenue and the taxpayer's accountant between 10 September 1986 and 6 February 1989 including the inspector's computation of the chargeable gain of the further assessment and annexed to a letter to the accountants dated 13 July 1988.
5. From the oral and documentary evidence adduced before us we found the following facts:
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(a) The taxpayer purchased the property on 27 November 1979 for £3,360 and sold it on 5 September 1984 for £25,000. At the date of purchase the property was in a dilapidated condition but was subsequently converted for letting as factory/industrial units. The taxpayer in his returns for the tax years ending 5 April 1982, 1983 and 1984 declared income from the rents received from these lettings in the sums of £2,715, £4,218 and £2,944 respectively.
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(b) The taxpayer's return for the tax year ending 5 April 1986 had showed under the heading "Chargeable Gains disposed of": "97 Balliol Road to be agreed". No other information was given about the disposal of the property. On 8 July 1986 the inspector issued an assessment for capital gains tax in the sum of £10,000 under Taxes Management Act 1970 section 29 subsec-or-para (1)sec. 29(1)(b) of theTaxes Management Act 1970. The inspector had no knowledge of the exact acquisition cost and sale price at the time the assessment was issued. The assessment, however, was accepted by the taxpayer through his accountant in a letter dated 10 September 1986. This was because the taxpayer had not then been able to locate details of any particular expenditure incurred in the renovation of the property.
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(c) Following an enquiry, the inspector, during July 1988, obtained details of the exact figures for the acquisition and sale of the property. On 13 July 1988 the inspector sent a revised computation of the capital gains to the taxpayer through his accountant, and invited him to submit a claim for deductible expenditure. No such claim was made and on 14 July a further assessment was issued for the year ending 5 April 1985 in the sum of £10,264. On 26 August 1988 the taxpayer's accountant disclosed that on 17 August 1984 a Halifax Building Society account had been opened with a credit of £24,830.50 entitled "sale of Balliol Road."
6. We record, but make no finding as to fact, that the following submissions were made to us by the accountant on behalf of the taxpayer.
The documentation to support the expenditure incurred on the renovation of the property was not available because it had either been mislaid or lost during the taxpayer's house move at the same time that the property was sold in September 1984.
7. It was contended on behalf of the taxpayer:
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(a) The property was very run down when it was acquired.
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(b) Renovation works were carried out on the property.
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(c) Documents and accounts relating to the renovation works were mislaid and lost.
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(d) The taxpayer accepted the original estimated assessment of gain in the sum of £10,000.
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(e) The taxpayer does not have the information...
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