Phillips
| Jurisdiction | UK Non-devolved |
| Judgment Date | 09 March 2020 |
| Neutral Citation | [2020] UKFTT 138 (TC) |
| Date | 09 March 2020 |
| Court | First Tier Tribunal (Tax Chamber) |
[2020] UKFTT 138 (TC)
Judge Guy Brannan, Mr Leslie Brown
Income tax – Information notice under FA 2007, Sch. 36, para. 39 – Failure to comply with notice – Penalty – Claim for subsistence and training expenditure – Principles to be applied – Penalties for careless inaccuracies in 2016/17 self-assessment return under FA 2007, Sch. 24 – Appeal dismissed.
[1] This is an appeal against a closure notice in respect of the income tax year 2016/2017 issued under section 28A(1B) and (2) Taxes Management Act 1970 (“TMA”) issued on 15 March 2018. The appeal against a closure notice relates to two issues: the claim for a deduction in respect of subsistence expenses and for a deduction with regard to the costs of a training course. In addition, Mr Phillips (“the Appellant”) appeals against two penalties: the first is a penalty for failure to comply with an information notice under paragraph 39 Schedule 36 to the Finance Act 2008 (“FA 2008”) and the second is a penalty for careless inaccuracies in his self-assessment tax return for the tax year 2016/17 under paragraph 1 Schedule 24 to the Finance Act 2007 (“FA 2007”).1
[2] The Appellant and his agent, Mr Malcolm Dixon of CIS Tax Savers Ltd, did not attend the hearing. Mr Dixon had previously notified HM Courts and Tribunals Service that neither the Appellant nor Mr Dixon intended to attend the hearing on the grounds of cost.
[3] Having satisfied ourselves that the Appellant had been duly notified of the date and place of the hearing and in the light of the above notifications from Mr Dixon, we considered it to be in the interests of justice to proceed with the hearing in the absence of the Appellant and his agent.
[4] HMRC opened an enquiry into the Appellant's self-assessment tax return for the tax year 2016/17(“the tax return”) by a letter dated 11 August 2017. The HMRC received the Appellant's tax return on 24 April 2017. The letter stated:
I'm checking your tax return. I can do this under section 9A of the Taxes Management Act 1970.
[5] It was clear to us that this letter constituted a valid notice of HMRC's intention to enquire into the Appellant's tax return.
[6] The letter of 11 August 2017 contained a list of information which the Appellant was asked to provide by 10 September 2017.
[7] Although some of the information contained in the list was or had been provided by or behalf of the Appellant, some of the information requested had not been provided.
[8] Accordingly, on 15 September 2017, HMRC issued an information notice for the documents and information previously requested, requiring a response by 14 October 2017.
[9] This information notice was said by HMRC to have crossed in the post with a letter from Mr Dixon dated 7 September 2017, with which we were not provided. However, it is clear from a letter dated 19 September 2017 from Officer Williams of HMRC (the HMRC Officer dealing with the Appellant), that Mr Dixon's letter of 7 September was received by HMRC on 13 September 2017 but was only reviewed after the information notice had been dispatched. HMRC informed us that Mr Dixon's letter of 7 September provided some of the information requested but, since we have not had sight of this letter, we cannot confirm this.
[10] On 19 September 2017 HMRC issued a revised information notice to take account of the documents and information already provided. This information notice required a response by 18 October 2017. The schedule to this information notice listed the documents and information which HMRC required:
For the tax year 6 April 2016 to 5 April 2017
- Details of how the turnover figure of £15,689.00 was calculated and the records from which it was derived.
- An explanation as to why the turnover was reduced from £30,708.00 on 3/08/2017.
- A breakdown and evidence of the £7632.00 claimed for total allowable expenses. An explanation as to why the original CIS being claimed of £6142.00 has been reduced to £2968.00
- All bank and/or building society books or statements, cheque-book stubs and deposit book counter foils for any account into which any income from the business or from which any expenditure from the business was paid during the period of accounts.
- Credit card statements for any cards used in the business.
[11] Because the letter of 7 September 2017 was not supplied to us it is impossible to determine whether some of this information was supplied prior to the issue of the information notice. It is clear from a letter of 19 September 2017 sent by Officer Williams to Mr Dixon that at least one CIS statement had already been sent to her and she had overlooked it (a matter for which she apologised).
[12] Attached to a letter dated 7 October 2017, Mr Dixon provided a schedule of expenses for the Appellant in relation to the tax year 2016/17 totalling £7,631.50. Following receipt of this letter, an extension to the period for provision of the documents and information required by the information notice of 19 September 2007 until 7 November 2017 was agreed (in a letter from HMRC dated 23 October 2017). In that letter HMRC noted, however, that the Appellant had not supplied evidence of that expenditure. In addition, HMRC also drew attention to the fact that the request for bank/building society books or statements, cheque-book stubs and deposit book counter foils at and credit card statements for credit cards used in the business had not been provided.
[13] Mr Dixon's letter of the 7 October 2017 confirmed that his firm had no involvement in the submission of the Appellant's tax return for the year 2016/17. The letter stated:
Mr Phillips had been unspecific about this for the reason, he has now informed us, of his acute embarrassment about the affair. We are informed that Mr Phillips's initial 2016/17 Tax Return was submitted in April 2017 by a 1/3 party without Mr Phillips's knowledge or agreement. Mr Phillips was approached by telephone by a person recommended to him whom he knew only as “Baggy” but whom he was assured was a Tax Agent. This person proceeded to register himself as Mr Phillips' Tax Agent online with Mr Philips' agreement. However he then submitted a Tax Return for Mr Phillips without any recourse to Mr Phillips and without any input from Mr Phillips on the amounts contained therein. In other words the Return was seemingly fabricated by the person known as “Baggy”. Mr Phillips informs us that the first occasion when he became aware that a return had been submitted on his behalf was when he received your initial letter, which we believe was dated 24 May 2017.
Mr Phillips is embarrassed about this and in particular that he agreed to use an untested Agent just because he had low fees on the basis of a recommendation. He is very clear that he had no involvement beyond the Agent becoming authorised. Whilst his action might be thought foolish, he could not have foreseen that “Baggy” would falsify a Tax Return and that he would become a victim of what appears to be an attempted fraud.
We trust this explains where the initial figures came from and if you wish to make further enquiries, Mr Phillips has provided us with “Baggy's” phone number which is [a 12 digit number]. Mr Phillips has no further details about “Baggy”, such as address or email. We would expect that you already have this information of course and are no doubt aware that “Baggy” wildest return and who he is. We can only record that it is a shame that HMRC did not see fit to share this with our office which would also have saved wasted time and work.
[14] No details were given concerning the person who recommended “Baggy” to the Appellant.
[15] The tax return made no reference to “Baggy” or any other person being nominated as an agent. The mobile telephone number for “Baggy”, provided by Mr Dixon, was one digit too long and it was not possible to make contact using that number. No email address, website or personal address exists for “Baggy”. HMRC ran security checks on the Appellant's account in May 2017. HMRC found no evidence of any attempted fraud on the Appellant's self-assessment record.
[16] We were provided with a copy of a letter from Mr Dixon which bore the date of “16 October 2017” providing, inter alia, an expenses breakdown. The date on the letter is evidently a typographical error because the letter refers to a letter from HMRC dated 23 October 2017 and is date stamped as having been received by HMRC on 21 November 2017. We consider, on balance, that Mr Dixon's letter was sent after 7 November 2017 and, in fact, probably not before 19 November 2017 (given the date of receipt in the ordinary course of post).
[17] As regards bank statements, Mr Dixon's letter of “16 October 2017” stated that the only bank or credit card account used by Mr Phillips for the purposes of his business was a Nationwide bank account. A more detailed breakdown of expenses was contained in the letter but there was no supporting evidence of this expenditure, save as regards mileage logs which had already been provided by Mr Dixon.
[18] The expenses included £895.31 (under the heading “Training/Courses”) in respect of “A Site Management training course – Total cost over £2000 is being paid monthly 20 months starting October...
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