Pipe v The Commissioners for H M HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR JUSTICE HENDERSON,Mr Justice Henderson : |
| Judgment Date | 04 April 2008 |
| Neutral Citation | [2008] EWHC 646 (Ch) |
| Court | Chancery Division |
| Date | 04 April 2008 |
| Docket Number | Case No: CH/2007/APP/0514 0516 0517 0518 |
[2008] EWHC 646 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand,
London, WC2A 2LL
The Honourable Mr Justice Henderson
Case No: CH/2007/APP/0514
0515
0516
0517
0518
Mr Oliver Conolly (instructed by Clarke Willmott Solicitors) for the Appellants
Mr Timothy Brennan QC (instructed by the Acting Solicitor for HMRC) for the Respondents
Hearing date: 27 February 2008
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
These are five consolidated and materially identical appeals by case stated from decisions of the General Commissioners for the Division of Exeter and East Devon (“the General Commissioners”) on 12 December 2006, when they held that continuing daily penalties imposed on the taxpayers for failure to deliver tax returns were valid in law, notwithstanding a mistake about the dates for which the penalties had been imposed in the penalty notices dated 29 September 2004 (“the Penalty Notices”) which were sent to the taxpayers.
The taxpayers are Mrs M E Pipe, Mr M C Pipe and Mrs M C Pipe in their personal capacities, and Mr M C Pipe in his capacity as trustee of two family settlements, the 1988 Family Settlement and the M C Pipe Children's Settlement. The five appeals were consolidated and directed to be heard together as a single appeal by order of Warren J dated 24 August 2007.
It is common ground that the taxpayers were all served with notices under section 8 of the Taxes Management Act 1970 (“ TMA 1970”) requiring them to make and deliver returns of their income and capital gains, typically for the seven tax years from 1996/7 to 2002/3 inclusive, and that they failed to comply with such notices, thereby incurring liability in the first instance to a fixed penalty of £100 for each default pursuant to section 93(2) of TMA 1970. There is no dispute about those initial fixed penalties. Furthermore, although various technical grounds of defence were relied upon before the General Commissioners in relation to the continuing daily penalties notified by the Penalty Notices, none of those grounds has been pursued on the present appeal to the High Court apart from the alleged invalidity of the Penalty Notices because of the failure to state the correct dates for which the penalties were imposed.
At the hearing of the taxpayers' appeals before the General Commissioners, the taxpayers were represented by a taxation consultant, Mr R L C Bibby of WestTax, and the Commissioners for H M Revenue & Customs (“HMRC”) were represented by a Debt Manager from the Cornwall and Plymouth Office, Mrs H Shaw. On the appeal to this court both sides have been represented by counsel, Mr Oliver Conolly for the taxpayers, and Mr Timothy Brennan QC for HMRC.
Facts
The relevant facts can be briefly stated. It is convenient to take the appeal of Mrs M E Pipe as representative.
On 16 August 2004 an authorised officer of the Board of Inland Revenue, Mr T Lloyd, applied in writing to the General Commissioners for the Division of Barnstaple for a direction under section 93(3) of TMA 1970, which provides as follows:
“If, on an application made to them by an officer of the Board, the General or Special Commissioners so direct, the taxpayer shall be liable to a further penalty or penalties [i.e. in addition to the fixed penalty of £100 under section 93(2)] not exceeding £60 for each day on which the failure continues after the day on which he is notified of the direction (but excluding any day for which a penalty under this subsection has already been imposed).”
In his application Mr Lloyd stated that Mrs Pipe had been served with notices under section 8 of TMA 1970 on various dates between 6 April 1999 and 13 December 2001 requiring her to make and deliver tax returns for the seven tax years from 1996/7 to 2002/3, and that she had failed to comply with the notices before the due dates (the latest of which was 31 January 2004) or at all. He asked for a direction that she should be liable to a penalty or penalties for each day on which each failure continued after the day on which she was notified of the direction.
On 7 September 2004 the General Commissioners for Barnstaple signed the application form and gave a direction in the terms requested, as follows:
“We … hereby direct that Mrs M E Pipe shall be liable to a penalty or penalties under Section 93(3) of the Taxes Management Act 1970 in respect of the failures detailed above for each day on which each failure continues after the day on which she is notified of this direction.”
On the following day, 8 September, an HMRC Recovery Officer, Miss T Parkes, wrote to Mrs Pipe to inform her of the direction and give her a last chance to submit the outstanding tax returns. The letter was headed in bold “ Late Tax Returns– Daily Penalties”, and referred to section 93(3) of TMA 1970. Miss Parkes then said:
“On 22 July 2004, I wrote to you to remind you to send in your [outstanding tax returns for 1996/7 to 2001/2]. I warned you that if you did not send in the Returns, I would ask the General Commissioners for authority to impose daily penalties.
At their meeting on 7 September 2004, they were told you had failed to send in your Tax Returns. They decided that daily penalties of up to £60 a day should be imposed on you for each failure.
Please make sure I receive your Returns within 14 days from the date you receive this notification. If I do not, penalties will be charged for each day that the failure continues starting with the day after the date you receive this notification.
You will not be sent any further warnings before penalties are charged, so please give the matter your immediate attention.
Please phone me immediately if you have any problems with completing the Returns.”
No response was received to this letter, and on 29 September 2004 another Recovery Officer, Mrs A J Mosley, wrote again to Mrs Pipe. The letter was headed in bold “ Penalty Notice”, and read as follows:
“This notice tells you that you are liable to a penalty under the Taxes Acts. It is addressed to you personally, as the law requires. If you have a tax adviser, please show him or her this notice at once.
The amount of the penalty is £840.00.
This should be paid within 30 days of the date of this notice.
The amount shown above will appear on your next Statement of Account. Details of the penalty are shown below.
[Information was then given about the right to appeal against the penalty.]
Details
Penalty under the provisions of [ section 93(3) TMA 1970] in respect of your continuing failure to comply with a notice served upon you for the purposes of Section 8 … of that Act … to deliver a return of income and chargeable gains for the year ended 5 April 2003 within the time required by that notice.
Daily penalties of £60.00 per day for the period from 15 April 2004 to 28 April 2004 (14 days).”
It can be seen at once, with the benefit of hindsight, that the specified period of 14 days from 15 April to 28 April 2004 in respect of which the daily penalty of £60 was purportedly imposed must have been a mistake, and that the period which Mrs Mosley meant to specify was obviously 15 September to 28 September 2004. There was no jurisdiction to impose a daily penalty for the 14 days in April, because no direction under section 93(3) had been obtained or notified to Mrs Pipe before the beginning of that period. On the other hand, a direction had been obtained on 7 September, Mrs Pipe had been notified of it by Miss Parkes' letter to her of 8 September, and she had also been told to expect penalties to be charged without any further warning. Accordingly, she could hardly have been surprised if she had received, under cover of a letter dated 29 September 2004, a penalty notice which referred to a daily penalty of £60 from 15 to 28 September 2004.
I should add that the Penalty Notice which I have quoted in paragraph 9 above is the one which is annexed to the case stated. It relates only to the failure to deliver a return for 2002/3, that being the latest of the seven years for which Mrs Pipe was in default. It is common ground, however, that she also received similar Penalty Notices in respect of each of the other six years, the penalty in each case being the same (£840), making a total of £5,880 (i.e. £840 x 7).
It is not clear whether Mrs Pipe, or any other member of the Pipe family, noticed the mistake which had been made. If they did, they said nothing about it. However, on 15 October 2004 Mr Bibby of WestTax wrote to Mrs Mosley appealing against all of the Penalty Notices on behalf of all five of the taxpayers. The letter asked for details of the direction given under section 93(3), and of the submissions made by HMRC on that occasion, “in order that we may state our grounds of appeal”.
On 25 February 2005 HMRC replied and supplied the information requested. However, no formal grounds of appeal were prepared before the hearing of the appeals on 12 December 2006. Meanwhile, on 5 April 2006 Mrs Shaw had written to WestTax to say that she would make arrangements for the appeals to be listed for hearing. Her letter included this statement:
“I have noticed from our files that [the Penalty Notices] contained an incorrect date, the notices were completed with the month of April instead of September.
I apologise for the mistake and felt you should be made aware that the Penalty Notice obviously covered the period 15 September 2004 to 28 September 2004.”
Statutory Provisions
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R Archer v The Commissioners for Hm Revenue and Customs
...blow. The court held that section 114 did cure the omission. At [28] Lord Dyson endorsed the observation of Henderson J in Pipe v HMRC [2008] EWHC 646 (Ch), [2008] STC 1911 that some mistakes may be "too fundamental or gross" to fall within section 114. Mr Goldberg argued that a document w......
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R (oao William Archer) v The Commissioners for HM Revenue and Customs
...concerns section 114(1), and in that regard two authorities are pertinent: the decision of Henderson J (as he was then) in Pipe v HMRC [2008] STC 1911, and the decision of the Court of Appeal in Donaldson. 90 At paragraph 51 of his judgment in Pipe, Henderson J said this: "In my judgment th......
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David Beadle v The Commissioners for HM Revenue and Customs
...substance and effect in conformity with or according to the intent and meaning of the Taxes Acts’. In Pipe v Revenue and Customs Comrs [2008] STC 1911, para 51, Henderson J said that a mistake may be too fundamental or gross to fall within the scope of the subsection. I agree. The same appl......
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Chadwick (as trustee in bankruptcy of Oduneye-Braniffe)
...of s 114(1). It does not assists us very much except that it endorses the approach of Henderson J (as he then was) in Pipe v R & C Commrs [2008] BTC 558 and in that case the judge considered a number of other cases.[159] We have read those other cases and from them draw the following A mist......