Ropelewska-Kaniewska
| Jurisdiction | UK Non-devolved |
| Judgment Date | 27 April 2021 |
| Neutral Citation | [2021] UKFTT 125 (TC) |
| Date | 27 April 2021 |
| Court | First Tier Tribunal (Tax Chamber) |
[2021] UKFTT 125 (TC)
Judge Anne Scott
Procedure – Application for closure notices – Nature of Tribunal's jurisdiction – Whether reasonable grounds for not giving a closure notice – Yes – Application refused.
[1] This case relates to enquires into self-assessment tax returns submitted by the applicant for the tax years 2015/16, 2017/18 and 2018/19.
[2] On 28 June 2020, an application was lodged with the Tribunal on behalf of the applicant seeking Closure Notices in relation to those enquiries. Although, of course, it is an application, Mr Ikzogwo lodged what was stated to be an “Appeal Statement” setting out the “Grounds of Appeal” against “Notices of Enquiry under S9A 1970 for the tax years ended 5 April 2019”. I am assuming that those are his arguments for seeking Closure Notices although it seems that he is questioning the validity of the enquiries. Those arguments can be summarised as follows:–
- Harassment – It is alleged that because the basis for the enquiries was stated to be the possible/potential personal tax implications arising from remuneration trust arrangements from which she may have received disguised remuneration Loans. It had become an annual harassment of the taxpayer.
- Duplication – it is alleged that the issue cannot be the subject of multiple enquiries covering four years.
- Scope – the subject matter is outside the scope of any enquiry as defined within statute because the taxpayer has no requirement to declare any loans. Section 9A Taxes Management Act 1970 (TMA) does not empower a general investigation into a taxpayer's affairs.
- Appeal Rights – If the single matter spans several years relating to the tax affairs of the taxpayer, section 9A TMA cannot be used since section 28A TMA closure powers would be inapplicable. (There was also an argument about section 29 TMA but HMRC have not yet used their powers under that provision.)
[3] HMRC have reasonable grounds for not issuing final Closure Notices. The application for issue of such Notices is refused.
[4] The hearing was conducted by video hearing. Two Bundles extending to 639 pages had been furnished. HMRC led the witness evidence of Mr Richard Cook, an officer of HMRC working in the Counter Avoidance section of HMRC. The appellant's representative declined to cross-examine Mr Cook and did not wish to lead evidence from the applicant. Her only contribution to the proceedings was to say that she had trusted her first accountant, and had been let down, but she had full trust in Mr Ikzogwo.
[5] Mr Ikzogwo declined to make any Submissions and asked that the application be decided on the basis of the written documentation which had been lodged. Having heard Ms Powell's Closing Submission he restricted himself to stating that the applicant wished HMRC to show why there were separate enquiries into the applicant's tax returns in addition to enquiries into Primrose Dental Practice Limited (“Primrose”). He stated that Primrose “has not resisted the enquiry” into its affairs and at the hearing HMRC had focussed on Primrose which was not a party to the application.
[6] Primrose is not a party to the application but HMRC rely, and have relied, on section 18(2)(c) Commissioners for Revenue and Customs Act 2005 to disclose information about Primrose which they view as being integral to these proceedings. Having reviewed the Bundles, I agree and find the facts accordingly, as the applicant was at all relevant times the controlling mind of Primrose.
[7] Although the application stated that there were four enquiries into the applicant's tax affairs, in fact that is not accurate. There were, and are, three and each was opened timeously.
[8] On 1 September 2017, HMRC wrote to the applicant opening an enquiry under section 9A TMA for the year ended 5 April 2016. That stated:
You are a director in a company which has used a trust arrangement and I am looking into any possible personal tax implications for you arising from the trust arrangement. However, when I look at this aspect I may find that I need to extend my check. If this happens I will let you know
[9] On 3 June 2019, HMRC issued a similar letter in the same terms for the year ended 5 April 2018.
[10] On 13 June 2020, HMRC opened an enquiry into the tax return for the year ended 5 April 2019.
[11] In the 2015/16 return, the applicant had declared income of £7,680 from employment and the employer was described as Primrose Dental Practice. There was interest declared of £65.
[12] The tax return for 2016/17, for which there is no enquiry, disclosed income of £7,600 from the same employer and interest of £470.
[13] The tax return for 2017/18 also disclosed income of £7,800 from the same employer.
[14] The tax return for 2018/19 did not have any employment income but the applicant had declared self-employment income of £74,936.
[15] I note that for earlier years, the declared income from Primrose was £6,510, £7,200 and £7,680 for 2012/13, 2013/14 and 2014/15 respectively. I also observe that in many of the years the figures for Director's Remuneration in the accounts for Primrose differ from the figures declared in her tax returns by the applicant (for example, see paragraph 22 below).
[16] Companies House records show that the applicant was a director of Primrose from 2 September 2009 to 22 November 2018. The registered office of Primrose currently is that of Mr Ikezogwo's business and the last accounts that were filed for Accounting Period Ending (“APE”) 31 October 2019 purport to show that he is the sole director.
[17] She was the sole director at all relevant times and she and a Mr Salwomir Kaniewski each held one ordinary share of £1 each.
[18] On 22 November 2018 an application was made to Companies House for Primrose to be struck off the Register and dissolved. That is still an active proposal to strike Primrose from the Register of Companies but HMRC has lodged an objection thereto so it has not progressed.
[19] It would appear that Primrose has never had any employees, albeit the accounts filed for APE 31 October 2018 state that there was one employee in each of APE 2018 and 2017 but the accounts for APE 2017 state that there were no employees in either APE 2017 or 2016. Certainly there are no deductions for wages in any of those years. The only deduction for wages was for £4,544 in APE 31 October 2013.
[20] All of the turnover in Primrose is generated by the applicant. It is a personal service company through which she provided her services as a dentist.
[21] On 4 April 2017, HMRC opened an enquiry into the company tax returns for Primrose for APE 31 October 2015 and 31 October 2016 and initiated Employer Compliance checks into APEs 31 October 2013, 2014, 2015 and 2016 in relation to the use of Remuneration Trusts “… referred to in the accounts”.
[22] On 30 July 2018, a further enquiry was opened into the company tax return for APE 31 October 2017 and a further Employer Compliance check was initiated for APE 31 October 2017. It again referred to the use of Remuneration Trusts “… referred to in the accounts”.
[23] On 14 September 2018, an amended Corporation Tax Return supported by an amended set of accounts for APE 31 October 2017 was submitted to HMRC. Although virtually every figure in the accounts had been amended, and some of them radically, the most striking change was that the previous item described as “Contribution to Remuneration Trust” in the sum of £84,216 had been deleted. The amended accounts also purported to show revised figures for APE 31 October 2016 and that too showed no deductions for “Contributions to...
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