Portland Gas Storage Ltd v Revenue and Customs Comrs
| Jurisdiction | UK Non-devolved |
| Judgment Date | 17 June 2014 |
| Neutral Citation | [2014] UKUT 270 (TCC) |
| Date | 17 June 2014 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2014] UKUT 0270 (TCC)
Upper Tribunal (Tax and Chancery Chamber)
Judge Timothy Herrington, Judge Judith Powell
Michael Thomas, Counsel, instructed by Field Fisher Waterhouse, solicitors, appeared for the Appellant
Sadiya Choudhury, Counsel, instructed by the Solicitor to HM Revenue and Customs, appeared for the Respondents.
Stamp duty land tax - Jurisdiction of the First-tier Tribunal - Whether HMRC made a decision giving rise to a right of appeal - Finance Act 2003 ("FA 2003"), Finance Act 2003 schedule 10 subsec-or-para 35Sch. 10, para. 35.
The Upper Tribunal allowed the taxpayer's appeal against a decision of the First-tier Tribunal: that decision had struck out an appeal lodged by the taxpayer (seeking a repayment of SDLT) on the basis that the FTT lacked jurisdiction because there had been no appealable decision by HMRC under Finance Act 2003, Finance Act 2003 schedule 10 subsec-or-para 35Sch. 10, para. 35.
The taxpayer (PG) had entered into an agreement for the grant of a lease in April 2008 with the intention that the lease attached to the agreement would be completed. Prior to grant of the lease, PG took possession of the land: this was an act of "substantial performance", crystallising a liability to SDLT, and PG filed a return and paid SDLT of some £168,000.
The lease was not completed as originally agreed. The parties to the agreement for lease executed a Deed of variation in June 2012, reducing the extent of the land to be demised and the annual rent payable. On the same day a lease recognising those changed terms was executed. PG then sought to amend its original land transaction return and reclaim some £68,000 of SDLT previously paid.
The amendment to the return, and claim for repayment, were contained in a July 2012 letter. HMRC rejected the claim by letter in August 2012, giving two reasons:
(2) it was not possible to make an amendment to the return since made more than twelve months after the filing date for the return;
(3) FA 2003, Finance Act 2003 schedule 17 subsec-or-para 12ASch. 17, para. 12A(4) did not apply on the basis that "any variation after [substantial performance] to reduce the rents and the area of the demise do not affect the calculation or entitle the purchaser to a repayment of tax".
Para. 12A(4) provides that where an agreement for lease has been substantially performed without completion "and the agreement is (to any extent) afterwards rescinded or annulled or is for any other reason not carried into effect, the tax paid shall (to that extent) be repaid".
There was additional correspondence between PG's solicitors and HMRC following HMRC's August 2012 letter, and HMRC referred the matter to their policy team, culminating in letters from HMRC, in November 2012, confirming their conclusions on the effect of time limits and whether the agreement for lease was or was not "carried into effect" for para. 12A(4) purposes. In the same month, PG's solicitors filed a notice of appeal in respect of HMRC's decision.
The Upper Tribunal (UT) said that PG accepted there were only two bases on which Tribunal jurisdiction in respect of an appeal could be accepted:
(2) if there had been "a conclusion stated or amendment made by a closure notice" within FA 2003, Finance Act 2003 schedule 10 subsec-or-para 35Sch. 10, para. 35(1)(b); or
(3) on the assumption that no closure notice had been issued, if HMRC could be directed to issue one under Finance Act 2003 schedule 10 subsec-or-para 24Sch. 10, para. 24.
The UT's own starting point was that it should not give para. 35(1)(b) a narrow construction, given the underlying philosophy that the FTT is the body invested with jurisdiction to deal with disputes between the taxpayer and HMRC. But at the same time there are authorities which show the statute conferring jurisdiction on the Tribunal cannot be construed so widely that the FTT is regarded as having jurisdiction to hear appeals that do not fall within the statutory words.
In the UT's view, HMRC's actions subsequent to their initial August 2012 rejection letter demonstrated that they opened an enquiry into the return, and the indication they gave to PG that they were seeking further advice was sufficient to constitute "notice of their intention to enquire" as required by Finance Act 2003 schedule 10 subsec-or-para 12Sch. 10, para. 12.
Further, the HMRC letters in November 2012 may be regarded as constituting a closure notice, since they were clearly intended to be a final expression of HMRC's views and recording the advice received from their legal team (satisfying the requirements of Finance Act 2003 schedule 10 subsec-or-para 23Sch. 10, para. 23(1)); and stating in effect that no amendment was permitted to the original return because of the time limit, alternatively amending the amended return so as to reduce the amount claimed down to zero (satisfying the requirements of Finance Act 2003 schedule 10 subsec-or-para 23Sch. 10, para. 23(2)).
In the light of these conclusions, the UT said it was not necessary to decide whether PG had the right to ask for a closure notice (pursuant to Finance Act 2003 schedule 10 subsec-or-para 24Sch. 10, para. 24); however, it expressed the view that it would be impossible to construe the legislation as giving rise to such a right in the absence of an open enquiry.
Based on the additional findings of fact made in the light of the post-August 2012 correspondence (which correspondence had not been before the FTT), the UT determined that the FTT's decision involved an error of law, that decision was to be set aside, and remade by the UT so as to dismiss HMRC's application to strike out the appeal. The matter must therefore return to the FTT for a substantive hearing of PG's arguments why the twelve month time limit for amending a land transaction return does not apply.
A lot of energy has been expended, at FTT and UT levels, in now getting this case back into the hands of the FTT, to consider what is perhaps the first question that needs to be answered - namely, whether a Finance Act 2003 schedule 17A subsec-or-para 12ASch. 17A, para. 12A(4) situation should be subject to the usual twelve month time limit for amending a return.
In reading the UT decision, it helps too to be aware of the concluding words of para. 12A(4), "repayment must be claimed by amendment of the land transaction return made in respect of the agreement".
[1]The Appellant ("Portland") appeals against a decision ("the Decision") of the First-tier Tribunal (the "FTT") released on 15 July 2013 striking out Portland's appeal under rule 8(2)(a) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (the "Rules"). The appeal was struck out on the grounds that the FTT lacked the jurisdiction to hear Portland's substantive appeal as there had been no appealable decision by the Respondents ("HMRC").
[2]The main substantive issue in these proceedings is whether Portland, within the statutory time limit, amended a land transaction return made in respect of an agreement for lease which it had entered into so as to trigger a repayment of stamp duty land tax ("SDLT"). Portland contends that HMRC issued a closure notice in response to Portland's amendment and such issue gives rise to an appealable decision under Finance Act 2003 schedule 10 subsec-or-para 35paragraph 35(1)(b) of Schedule 10 to the Finance Act 2003 ("FA 2003"). In the alternative, Portland contends, if HMRC's response did not amount to a closure notice then the FTT has power to direct one under Finance Act 2003 schedule 10 subsec-or-para 24paragraph 24 of that Schedule which Portland can then appeal. Portland also contends that the FTT erred in law in determining the substantive time limit issue and used this determination as part of its reasoning to determine the jurisdiction issue. HMRC contends that no closure notice was issued neither is there power for the Tribunal to direct one to be issued and consequently there is no appealable decision within Finance Act 2003 schedule 10 subsec-or-para 35paragraph 35 of Schedule 10 FA 2003. HMRC also contends that the FTT did not determine the time limits issue nor did this form part of its reasoning on the jurisdiction issue.
[3]Paragraph 12A of Schedule 17A FA 2003 provides so far as relevant as follows:
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(1)This paragraph applies where in England and Wales or Northern Ireland
(a) an agreement for lease is entered into, and
(b) the agreement is substantially performed without having been completed.
(2)The agreement is treated as if it were the grant of a lease in accordance with the agreement …beginning with the date of substantial performance…
(3)…
(4)Where sub-paragraph (1) applies and the agreement is (to any extent) afterwards rescinded or annulled or is, for any other reason not carried into effect, the tax paid by virtue of sub-paragraph (1) shall (to that extent) be repaid by the Inland Revenue.
[4]Paragraph 6 to Schedule 10 FA 2003 provides:
6(1)The Purchaser may amend a land transaction return given by him by notice to the Inland Revenue.
(2)The notice must be in such form and contain such information as the Inland Revenue may require.
(3)Except as otherwise provided, an amendment may not be made more than twelve months after the filing date [of the original return]
[5]Paragraph 12 of Schedule 10 gives HMRC power to enquire into a land transaction return in the following terms:
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(1)The Inland Revenue may enquire into a land transaction return if they give notice of their intention to do so ("notice of enquiry") -
(a) to the purchaser,
(b) before the end of the enquiry period.
(2)The enquiry period is the period of nine months -
(a) after the filing date, if the return was delivered on or before that date;
(b) after the date on which the return was delivered, if the return was delivered after the filing...
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Faulkner
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