Rea v Highnam (Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judgment Date | 13 March 1990 |
| Date | 13 March 1990 |
| Court | Chancery Division |
Chancery Division.
Vinelott J.
Mr Matthew Caswell (instructed by Edwin Coe & Calder Woods, agents for Mincoff, Science & Gold, Newcastle upon Tyne) for the taxpayer.
Mr Alan Moses (instructed by the Solicitor of Inland Revenue) for the Crown.
Income tax - Fraud or wilful default - Assessments from 1968-69 to 1976-77 to be made only if finding of fraud or wilful default made by commissioners - Whether commissioners made a clear finding of wilful default - Taxes Management Act 1970 section 36Taxes Management Act 1970, sec. 36.
This was an appeal by the taxpayer against the determination of the general commissioners for Gosforth substantially confirming estimated further assessments under Income and Corporation Taxes Act 1988Sch. D, Case I for the years 1968-69 to 1976-77 in the absence of records of income and expenditure. The assessments were out of time and the burden was therefore on the inspector to show that the taxpayer was guilty of fraud or wilful default within the Taxes Management Act 1970 section 36Taxes Management Act 1970, sec. 36.
The taxpayer traded as an ice-cream vendor from 1965. He kept no prime records of his business activities. Following an investigation into his affairs it appeared to the inspector that the taxpayer's income was insufficient to cover his expenditure.
In July 1983 the inspector received from the taxpayer's accountants documents showing deposits in a private bank account which had no identifiable source, and at meetings in September the taxpayer admitted that some of the accounts submitted by his accountants were incorrect, an admission which he subsequently withdrew, and no satisfactory explanation was given for the source of the bank deposits.
Capital statements prepared by the taxpayer's accountant were not accepted by the inspector who prepared his own revised capital statement including estimates of outgoings and living expenses.
The general commissioners stated their conclusion that the tax charged by the further assessments for the years 1968-69 to 1976-77 constituted a loss of tax to the Crown attributable to wilful default by the taxpayer.
The taxpayer contended that the commissioners did not find, or did not find in sufficiently unambiguous terms, that there had been fraud or wilful default; that a very clear finding was needed; that there was a heavy burden of proof on the Crown; and if there was any doubt that a finding of wilful default had not been made the appeal should be allowed.
Held, dismissing the taxpayer's appeal:
The commissioners' decision might have been expressed more clearly. They might have said that it was plain from the capital statements that there were undeclared receipts and that that must have been known to the taxpayer. But it was beyond dispute that, on the evidence before them and having regard to the facts found, their conclusion was unimpeachable and inevitable.
1. At a meeting of the commissioners for the general purposes of the income tax for the Division of Gosforth held on 26 and 27 March 1987 Mr Liberato Rea ("the taxpayer") appealed against assessments made on him for the years 1965-66 to 1985-86 under Income and Corporation Taxes Act 1988Sch. D, Case I in respect of his profits as an ice-cream vendor. [The amounts of the assessments ranging from £1,015 to £10,000 were listed.] All the assessments for the years 1965-66 to 1982-83 inclusive were further assessments and all the assessments for the years 1983-84 to 1985-86 were main assessments.
2. The assessments for the years 1965-66 to 1976-77 had been raised under the authority of Taxes Management Act 1970 section 36sec. 36 of the Taxes Management Act 1970 in accordance with leave given by a general commissioner of the Gosforth Division on 19 September 1986.
3. The questions for our determination were:
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(a) whether the accounts submitted to the Inland Revenue on behalf of the taxpayer were correct and...
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