Revenue Scotland v Classic Land and Property Ltd
| Jurisdiction | Scotland |
| Judgment Date | 07 September 2017 |
| Date | 07 September 2017 |
| Court | Lands Tribunal (Scotland) |
[2019] UT 5
Upper Tribunal for Scotland
Mr David Small
Land and buildings transaction tax – Penalties for late filing of land-transaction return – Appeal following review – Whether penalties invalid due to failure to notify appellant of Revenue Scotland's position and conclusions – No – Whether review could be treated as concluded and taxpayer's appeal validly made despite the procedural defect – Yes – Whether taxpayers had reasonable excuse for late filing – No – Revenue Scotland and Tax Powers Act 2014 (RSTPA 2014), s. 178, 237, 239, 241, 250– Appeal allowed – Decision of First-Tier Tax Tribunal for Scotland quashed – Penalties reinstated.
The Upper Tribunal for Scotland, in quashing the decision of the former First-Tier Tax Tribunal for Scotland (FTTS) and reinstating the late-filing penalties on the taxpayers, held that:
- the FTTS had erred in law in finding that procedural defects by Revenue Scotland invalidated the penalties, but agreed with the FTTS that the taxpayers had no reasonable excuse; and
- on a purposive interpretation of the legislation, Revenue Scotland's review could be treated as having been concluded even if the correct notification procedure had not been followed.
The Respondents (the “taxpayers”), Classic Land and Property Ltd, had purchased a property in Renfrewshire on 3 April 2015, for a chargeable consideration of £41,000, but their agents failed to file the land-transaction return until 17 February 2016 (290 days late). As a result, Revenue Scotland issued penalty notices totalling £1,000 in all (a first late-return penalty under RSTPA 2014, s. 160(2) of £100 and a 3-month penalty under RSTPA 2014, s. 161 of £10 a day for a period of 90 days). The taxpayers, via their agents, sought and were granted a review. The review confirmed the decision to issue the penalty notices. Crucially, however, neither the letter giving notice of Revenue Scotland's view of the matter nor the letter giving notice of Revenue Scotland's conclusions was sent to the taxpayers (as required under RSTPA 2014, s. 237(1), 239(1), 241 and 250(2)) being sent, instead, only to the taxpayers' agents.
The grounds for the subsequent appeal to the tribunal were that, given what they said were the “exceptional circumstances” of the case, the agents, and through them the taxpayers, had a reasonable excuse for the filing delay. The FTTS dismissed this argument but then held that, in view of the failure by Revenue Scotland in respect of its review to notify the taxpayer either of its position or of its conclusions, this procedural defect “vitiate[d] all subsequent procedure”. On this basis, the FTTS allowed the appeal and cancelled the penalties. Revenue Scotland was eventually given leave to appeal.
Before the Upper Tribunal, Revenue Scotland argued:
- its procedural defects in handling the review did not mean that the taxpayers' appeal against the penalties had inevitably to succeed;
- in any event, the procedural defects should be disregarded as there had been no prejudice to the taxpayers;
- alternatively to (b), if its review had not formally been concluded by the failure to notify the taxpayers, the taxpayers' appeal had not been valid, and the FTTS should have recognised it had no jurisdiction
The Upper Tribunal held, on the first ground, that the FTTS had indeed erred in law in cancelling the penalties merely because of Revenue Scotland's failure to notify the taxpayers (as opposed to their agents). The decision of the FTTS appeared to be based on a broad principle of law that an appellant against a decision of an official body had necessarily to have his appeal allowed by the tribunal if the official body had failed to observe statutory procedural requirements subsequently to the making of the disputed decisions (the penalty notices) but prior to the lodging of the appeal. In the Upper Tribunal's view, no such general principle existed in the law. In any case, even if it did, and indeed vitiated all subsequent procedure, the penalty notices had been validly issued before the procedural defects took place. Furthermore, since the original appeal had itself been lodged subsequent to the defects, the appeal itself would have been vitiated; on its own logic, the FTTS should then have declined jurisdiction. The decision must therefore be quashed.
The Upper Tribunal then turned to the correct application of the relevant provisions of the RSTPA, in particular of RSTPA 2014, s. 241(4), which provides that an appellant may not appeal to the tribunal where a review requested by him has not been “concluded or treated as concluded”. In the present case, both parties had acted as if the review had been concluded even though, in law, since Revenue Scotland had failed to notify the taxpayers of its position on the matter under review (as required by RSTPA 2014, s. 237(1)), the 45-day period within which Revenue Scotland had to notify the taxpayers of its conclusions had not yet begun. The tribunal found that the words “treated as concluded” could only refer to the situation in which the 45-day period fixed by RSTPA 2014, s. 239 had elapsed. The appeal, therefore, was premature unless the review could be regarded as having been concluded even in the absence of the correct statutory notification. On balance, the tribunal took the view that the meaning of the word “concluded” in RSTPA 2014, s. 241 should be construed as including situations, such as in the present case, where Revenue Scotland had completed its substantive work on the review even if it had failed to notify the taxpayer in person of its conclusions. It could not have been the intention of the legislation that a taxpayer who had become aware of the unfavourable conclusions of a review should have to await a correctly addressed letter from Revenue Scotland before being able to lodge an appeal.
Since the appeal was thus validly made, it remained only to consider the question of reasonable excuse. The taxpayers' agents were well experienced in making land-transaction returns and submitting them timeously. Moreover, the taxpayers had signed the return (showing no tax payable) and returned it to the agents in good time for its punctual submission. However, on the non-binding precedent of Chartridge Developments Ltd [2016] TC 05493, the taxpayers had taken no steps to ensure or check that their agents had submitted the return on time. The FTTS had therefore not erred in law in finding that the taxpayers had no reasonable excuse for late filing.
The Appellants' (Revenue Scotland's) appeal would therefore be allowed and the decision of the FTTS quashed and remade by dismissing the taxpayers' appeal against the penalty notices and reinstating the penalties.
A costly result for the taxpayers, who had no tax to pay but have incurred £1,000 of late-filing penalties. The Upper Tribunal took what was clearly a common-sense decision if a somewhat adventurous one. On a strict interpretation of the law, Revenue Scotland's review had not been concluded and therefore neither the FTTS nor the Upper Tribunal had jurisdiction to hear the appeal, which was premature. To have gone down that line, however, would have merely led to the expense of another hearing on the same facts.
As an aside, the frequency of typographical errors in case transcriptions seems to be increasing. In the present case, there were no fewer than 12 occasions on which either the abbreviations FTTS or LBTT were misspelled as FTIS or LBIT. Deficiencies in optical character recognition are presumably the cause, but does no-one in the tribunals service proof-read these?
[1] This is an appeal by Revenue Scotland (“RS”) against a decision of the First-tier Tax Tribunal for Scotland (“FTTS”) dated 14 December 2016. By that decision the FTTS allowed an appeal by Classic Land and Property Limited (“Classic”) against two penalty notices which charged penalties of £1,000 in total. The notices had been issued by RS as a result of a failure by Classic timeously to make a return of a land transaction for the purposes of Land and Buildings Transaction Tax (“LBTT”). Before the FTTS the appeal was classified as a “default paper case” and was decided without a hearing.
[2] RS were initially refused permission to appeal by the FTTS, but were subsequently granted permission by the Upper Tax Tribunal for Scotland (“UTTS”) in a decision dated 7 March 2017.
[3] The FTTS and the UTTS were abolished with effect from 24 April 2017, their functions and open cases being transferred, respectively, to the Tax Chamber of the First-tier Tribunal for Scotland and to the Upper Tribunal for Scotland. (The Scottish Statutory Instruments giving effect to the transfers were SSI 2017 No. 106, The First-tier Tribunal for Scotland (Transfer of Functions of the First-tier Tax Tribunal for Scotland) Regulations 2017 and SSI 2017 No. 105, The Upper Tribunal for Scotland (Transfer of Functions of the Upper Tax Tribunal for Scotland) Regulations 2017). Revenue Scotland's appeal thus came before me sitting as a legal member of the Upper Tribunal for Scotland.
[4] I made pre-hearing Directions asking the parties to exchange and submit lists of documents and notes of argument according to a prescribed timetable. The Appellants provided both documents and a note of argument, but nothing was received from the Respondents. On the day of the hearing Mr Alasdair Burnet, Advocate, appeared for the Appellants with his instructing solicitor. The Respondents did not appear and were not represented. On the previous day I had been informed by the administrative staff of the Upper Tribunal that the Respondents had been notified by post of the date, time and place of the hearing, that the notification letter had enclosed a copy of the Directions, that a copy of the letter had been emailed to the Respondents' agents (Messrs Miller, Beckett and Jackson, solicitors) and that there was no...
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