Rigby v Jayatilaka (Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judgment Date | 13 January 2000 |
| Date | 13 January 2000 |
| Court | Chancery Division |
special commissioners decision
MR T H K EVERETT
Income tax - Capital gains tax - Self assessment - Claim to relief against taxpayer's income or capital gains in respect of irretrievable losses - Appeal against amendments by the Inspector to the taxpayer's self assessments for 1996/97 and 1997/98 - Inquiry into taxpayer's affairs opened and closed - Taxes Management Act 1970 section 9ATaxes Management Act 1970 s. 9A - Taxation of Chargeable Gains Act 1992 section 253Taxation of Chargeable Gains Act 1992 s 253 - Taxes Management Act 1970 section 54Taxes Management Act 1970 s. 54
Mr John Rigby ("the Taxpayer") is an elderly gentleman who believes, with some justification, that his present reduced financial circumstances are due entirely or mainly to inappropriate and unwarranted actions by the Inland Revenue.
Until 1976 he was a successful businessman with substantial assets and income. In that year he received tax assessments totalling £2,280,000 and he claims that the issue of those assessments caused his bank to withdraw support and led to the collapse of his business. The assessments were later vacated by the Inland Revenue.
In 1995 the Taxpayer appealed assessments to income tax for the years 1989/90 to 1993/94 inclusive before the General Commissioners. His appeals were dismissed. Subsequently he appealed the decision of the General Commissioners before Rattee J in the High Court in the case of Rigby v Samson 71 TC 153. The learned Judge dismissed the Taxpayer's appeals.
The Taxpayer now appears before me to appeal against amendments made by the Respondent Inspector to the Taxpayer's self-assessments for the years 1996/97 and 1997/98. There is no dispute between the parties concerning the Taxpayer's income. The only point at issue is the Taxpayer's claim to relief against income or capital gains in respect of the following irretrievable losses: 1996/97 Loss brought forward £561,116 Irrecoverable loan £487,378 Guarantee payments £391,773 Loss on sale of factory £190,000 Expense of sale £129,960 Loss of rent £4,426,500 Compound interest £12,415,893 1997/98 Loss brought forward £18,562,580 Compound interest £1,113,754
The evidence before me consisted of a bundle of documents produced by the Taxpayer and three bundles of documents produced by the Respondent. Although formally there was no oral evidence, in presenting their cases the Taxpayer and the Respondent inevitably made various statements of fact.
At one stage the Taxpayer contended that his appeals for the. years 1994/95 and 1995/96 were still open. I reject that contention on the basis of his letter to the Respondent Inspector dated 11 December 1998 where he said:
I enclose my analysis for the years 1994/95 and 1995/96 of which you have accepted for myself before. You have not disputed the contents of these analyses which are determined under Taxes Management Act 1970 section 54section 54 of the Taxes Management Act 1970.
The Inland Revenue did not attempt to resile from the Taxpayer's claim that an agreement pursuant to Taxes Management Act 1970 section 54section 54 existed in relation to the two years in question.
The Taxpayer was a manufacturer and retailer of furniture. Jointly with his wife he owned the lease of a factory at North Harbour Road, Cosham, Hants, until 1976.
At a later date, in June 1989 the Taxpayer took over the businesses of two companies, Kellnore, Furnishings Ltd and Rigby's of Portsmouth Ltd, of which he became the controlling shareholder and sole director and to which he lent money. The loans were never repaid as the companies were liquidated.
The Taxpayer submitted his 1996/97 return on 9 September 1997. It was dated 5 September 1997. It had a capital gains page attached to it which stated:
Earlier years' losses. Unused losses of earlier years
-
-as disclosed in the 1995-96 tax returns £561,116
Used this year £17,170
Carried forward losses of 1995-96 and earlier years £561,116
On 8 December 1997 the Taxpayer submitted a revised version of the capital gains tax page for 1996/97 to the Inspector. This showed unused losses of earlier years totalling £1,048,494. That figure is produced by adding together the loss brought forward figure (now claimed) of £561,116 plus the irrecoverable loan figure of £487,378.
On 26 January 1998 the Taxpayer submitted a third version of the capital gains page for his 1996/97 return to the Inspector. This contained a further £17.5 million of losses, showing total losses of £18,562,580 (which is the figure now claimed by the Taxpayer as loss brought forward, in his claim for 1997/98).
On the back of this third capital gains sheet which the Taxpayer submitted for the year 1996/97 he detailed his claim and headed it "extended capital losses of the Plaintiff". The details are as follows:
Description of Asset Loss
The Plaintiff loaned £391,773 to Rigby's of Portsmouth by guarantee in their overdraft. This loan was lost when the bank forced the sale of his factory £391,773
Loss on the sale of the Plaintiffs £190,000 factory plus expenses incurred £129,960
Loss of rent through the forced sale of the Plaintiffs factory £4,426,500
Loss of accruing compounding interest on £5, 174,233 at 6 % for 21 years = £12,415,843 which the Plaintiff suffered £12,415,893
Total losses £17,554,126
To the above total figure the Taxpayer added the figure brought forward from his earlier page in the sum of £1,048,494 producing a total loss figure for 1996/97 of £18,562,580.
On 10 September 1998 the Taxpayer submitted his 1998 return. It was undated. The capital gains sheet attached to it showed losses brought forward of £18,562,580 to which a figure for interest had been added, amounting to £1,113,754.
The total losses now claimed by the Taxpayer amount to £19,676, 334.
On 2 September 1998 the Respondent Inspector opened an enquiry into the Taxpayer's 1996/97 return pursuant to Taxes Management Act 1970 section 9Asection 9A Taxes Management Act 1970. On 9 November 1998 she opened a similar enquiry into the Taxpayer's 1997/98 return but immediately closed both enquiries, inviting the Taxpayer to amend his self-assessment to remove any loss relief. It was suggested that he should amend his self-assessment to a figure of £4,500.60...
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