Parsons
| Jurisdiction | UK Non-devolved |
| Judgment Date | 16 August 2018 |
| Neutral Citation | [2018] UKFTT 485 (TC) |
| Date | 16 August 2018 |
| Court | First Tier Tribunal (Tax Chamber) |
[2018] UKFTT 0485 (TC)
Judge Richard Thomas
Income tax – Repayment claims by non-resident – Personal allowances ITA 2007, s. 56 – Claims under ICTA 1988, s. 788 and TIOPA 2010, s. 6 – Whether reasonable excuse for late claims in some years – Raftopoulou v R & C Commrs [2015] BTC 535 applied – Whether in date claims refused had been enquired into – Portland Gas Storage Ltd v R & C Commrs [2014] BTC 520 and Raftopoulou considered.
Income tax – Penalties for late filing of returns – Whether returns delivered before the due date.
[1] This was an appeal by Ms Joanna Parsons (“Joanna”) against two penalties each of £100 assessed on her for her failure to deliver to the respondents (“HMRC”) an income tax return for the tax years 2014–15 and 2015–16 by the due date of 20 May 2017.
[2] She also claimed to appeal against decisions of HMRC not to make repayments to her of income tax suffered on interest from banks and building societies for the tax years 2008–09, 2009–10, 2010–11 and 2011–12. I have also taken her as having appealed the refusal by HMRC to repay such tax for the years 2014–15 and 2015–16 (repayments having been made for the intervening years, 2012–13 and 2013–14).
[3] In the relevant periods (ie from 6 April 2008 to 5 April 2016) Joanna was not resident in the United Kingdom and was resident in Guadeloupe, an overseas department (département d'outremer – DOM) of France. She has been represented in her dealings with HMRC and the Tribunal by her father, Mr Oliver Parsons (“Oliver”), with whose own tax affairs hers are linked. I mean no disrespect by referring to each by their first name, as I think it would be unnecessarily confusing to refer to the appellant, the appellant's agent and the appellant's father, especially when I need to refer to Oliver both in his capacity as Joanna's agent and in relation to his own tax affairs, which are closely bound up with Joanna's.
[4] As is usual in paper cases I have a bundle prepared by HMRC consisting of their statement of case (“SoC”) to which they appended some of the relevant papers. Oliver, in his appeal to the Tribunal on Joanna's behalf and in his reply to the SoC, has also exhibited a number of documents and schedules, including a schedule of correspondence. Not all of the letters referred to in that schedule are in the bundle and, where they are not, I have not referred to them in this decision unless I indicate by referring to the “OP Schedule”. But even then given Oliver's very brief précis of the contents and what seems to be some dubious dating in places, I put no substantial weight on them except where other documents I do have corroborate the description.
[5] The facts set out below are not in dispute. There is one issue of fact which is central to the penalty appeal and that is whether the returns were delivered by the due date (as Joanna asserts) or not (as HMRC say). I make findings about that issue in the discussion section.
[6] On 11 January 2013 HMRC began an enquiry under s 9A Taxes Management Act 1970 (“TMA”) into Oliver's return for 2010–11.
[7] The reason for the enquiry was that HMRC had information (which they had doubtless obtained under the powers in Schedule 23 Finance Act 2011 and regulation 5 of the Data-gathering Powers (Relevant Data) Regulations 2012) about interest received under deduction of tax from accounts in Oliver's name with banks and building societies in the UK, which interest was not disclosed on the return.
[8] On 12 March 2013 HMRC amended Oliver's return, charging tax on the interest at excess rates (ie the excess of higher rates over basic rate). They also charged a penalty.
[9] I assume that Oliver appealed against the amendment. Certainly on 15 February 2014 he supplied detailed information for 2010–11, 2011–12 and 2012–13 about the accounts from which interest had been omitted from his return. He explained that he held the accounts in trust for Joanna and asked for the amendments and the penalty to be cancelled.
[10] On 23 May 2014 Oliver wrote to give further information and explained that in May 2008 Joanna had asked him to place her money in British building societies, and that she had minimal income in France and drew the interest to live on. The accounts are in the name of Mr and Mrs Parsons and when asked by the banks etc to name the accounts they call them “Joanna”. As the income belonged to Joanna he had not returned it.
[11] On 19 June 2014 Mr Paul Kilpatrick of HMRC Local Compliance replied saying:
As these accounts were opened in your name then they are assessable on you.
Your daughter would only receive personal allowances if the money was invested in her name.
[12] The rest of the letter was devoted to the penalties that flowed from the fact that:
it has now been established that the following error has been included (sic) in the 2011–12 Tax Return …
- You have failed to declare taxed interest received of £6,108 on your Tax return for this year.
[13] The next letter from Mr Kilpatrick in the bundle is one of 14 August 2015 replying to Oliver's letter of 15 May 2015. In this he said that:
I have discussed the information provided [by Oliver] with a technical specialist who has clarified that the interest is fully assessable on you as the monies (sic) were invested in accounts in your name and are treated as your as a result of this. The only way to avoid this is to have your daughter invest the monies herself. As long as the funds remain in your account they will continue to be assessable on you.
[14] The next letter from Mr Kilpatrick in the bundle is one of 14 October 2015 replying to Oliver's letter of 22 September 2015. In this he says that:
I should give you a bit more background about what has happened in this case.
My initial thoughts were that the income was clearly assessable on you as the bank accounts are clearly in your name, the funds may well have come from your daughter but they are held solely in your name and therefore assessable on you by law, these are the facts and I have no leeway on this.
A colleague suggested there may be a trust in existence and the monies may be held in trust, but when you eventually sent me the information this proved not to be the case.
I then took advice from a more senior officer who is a technical specialist in this field and he clarifies that as the interest is held in your name it is clearly assessable on you and she agrees with my findings.
I have also referred this to a senior manager who agrees with the view of the technical specialist.
[15] The next letter from Mr Kilpatrick in the bundle is one of 23 November 2015 replying to Oliver's letter of 19 October 2015. Here he admits to performing a volte face:
I have spoken to a Trust Specialist at length about the case and he agreed that I can accept that these monies were invested on behalf of Joanna.
[16] The amendments to the tax returns were cancelled as was a s 29 TMA assessment and the penalties charged.
[17] On 31 August 2016 Joanna wrote to HMRC giving her National Insurance number and address in Guadeloupe and saying that she had had savings invested on her behalf in UK Building Societies in the names of her parents, and that after extensive correspondence with HMRC it was now agreed that the interest was her income.
[18] She enclosed a schedule of the interest and said that it was below her personal allowance and asked for repayment of the tax deducted at source.
[19] She added that funds had now been reinvested in a buy-to-let property (I assume in the UK) and she asked for a tax reference number (UTR) and tax return forms.
[20] The schedule shows the interest from 2008–9 to 2015–16, though the amounts for the last year were less than £100. The accounts were all closed or had no interest after 2015–16.
[21] OP Schedule refers to a letter from HMRC to Joanna of 26 September 2016 where it is said that HMRC needed Forms R40 for 2012–13 onwards and dates of the buy-to-let property.
[22] OP Schedule refers to a letter of 22 January 2017 where it is said that Joanna enclosed Forms R40 for the 8 years 2008–09 to 2015–16; explained that HMRC had considered the interest was her father's between 12 February 2013 and 23 November 2015; asked HMRC to accept the refund claims for all years and explained that the property had been bought on 27 November 2014 and let from 1 December 2014 to 23 September 2016.
[23] In post-hearing submissions HMRC has supplied a copy of “Contact History Details” dated 11 February 2017. The “contact” was a “letter in” from Joanna. The “actions” recorded are:
R40 Form received for 08/09–15/16. Set up SA for TP as IFP net income over £2500. IABD updated with R40 info for 12/13 and 13/14. P800 issued and repayment sent to bank.
[24] I find that these contact details must refer to the letter described in paragraph 22. But in her letter of 20 April 2017 (see paragraph 28) Ms S Godley, an officer of HMRC, says the R40s were received by HMRC on 2 February 2017. As the precise date is not material I do not need to decide whether Ms Godley or Oliver is correct.
[25] Screenshots of the “Return Summary” on HMRC's Self Assessment computer system show that for 2014–15 and 2015–16 Joanna was issued with a “full return” on 13 February 2017 and that the case was classified as a “Failure to Notify” case.
[26] OP Schedule refers to a letter of 14 February 2017 where it is said that HMRC would repay 2012–13 and 2013–14. (In her letter of 20 April 2017 Ms Godley says this was done on 1 March 2017). OP Schedule also says that HMRC told Joanna that earlier years were out of time; said they required 2014–15 and 2015–16 tax returns by 20 May 2017 and gave her a UTR.
[27] OP Schedule refers to correspondence on 16 February 2017 about which it is said that HMRC sent tax calculations for 2012–13 and 2013–14 including personal allowances and showing the repayment due.
[28] The next letter...
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