Spring Capital Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 12 January 2015 |
| Date | 12 January 2015 |
| Court | First Tier Tribunal (Tax Chamber) |
Judge Barbara Mosedale
Mr R Thomas, director, appeared for the Appellant
Mr A Stewart, HMRC officer, appeared for the Respondents
Penalty Whether failure to comply with information notice Whether information notice related to statutory records Whether information notice valid Whether reasonable excuse for non-compliance Appeal dismissed.
[1] A notice (the information notice) under paragraph 1 of Schedule 36 to the Finance Act 2008 (Sch 36) was issued to the appellant company on 5 March 2013 requiring the company to provide information and produce documents in respect of the period ended 30 April 2010 no later than 14 April 2013.
[2] Paragraph 1 of Sch 36 provided as follows:
1
(1) An officer of Revenue and Customs may by notice in writing require a person (the taxpayer)
a) to provide information, or
b) to produce a document,
if the information or document is reasonably required by the officer for the purpose of checking the taxpayer's tax position.
(2) In this schedule, taxpayer notice means a notice under this paragraph.
[3] On 30 August 2013 HMRC issued a 300 penalty against the company for (alleged) non compliance with the information notice.
[4] On 17 October 2013 the appellant requested that HMRC carry out a review of the imposition of the penalty but HMRC failed to carry out the review. On 4 June 2014 HMRC wrote to the appellant formally notifying it that (under section 49E(9) Taxes Management Act 1970) the review was treated as concluding with HMRC's view of the matter being upheld. HMRC's view was that the penalty was properly imposed.
[5] The facts are largely set out above. In addition to that I had copies of the letters and emails passing between the parties.
[6] Both parties had stated before the hearing that neither would be relying on witness evidence. At the hearing Mr Thomas did chose to give a little evidence about the company's position on the Data Protection Act 1998 (DPA) which was as follows:
He had read an article about the DPA and HMRC's information powers in October 2013;
The company did not take legal advice on the DPA and how it interacted with HMRC's right to demand information under Sch 36.
Mr Stewart also gave evidence on this point in that he said that he had only read HMRC's guidance on the DPA and undertaken no further research on the matter. I accept this unchallenged evidence from both parties, and deal with its relevance below.
[7] The appellant raised some 9 grounds of appeal in its notice of appeal but Mr Thomas informed me at the hearing that he was not proceeding with any of them other than those raised in the hearing. The grounds of appeal which it still maintained were:
1) The appellant's case is that it lodged an appeal with HMRC against the information notice on 8 March 2013 and was (it says) wrongly advised by HMRC on 8 April 2013 that there was no right of appeal against it. Its case is that its appeal against the information notice is outstanding and until it is resolved penalties cannot be issued for non compliance with the information notice; I deal with this at paragraphs 25, 29, 49 and 52.
2) Compliance with at least part of the information notice would cause the appellant (it says) to breach the Data Protection Act (DPA); I deal with this at paragraphs 44, 5458.
3) The information notice was (it says) a fishing expedition; I deal with this at paragraph 36 and paragraphs 5960.
4) The information notice had been part complied with and that compliance had been a time-consuming exercise; I deal with this at paragraph 13 and paragraphs 6162.
[8] HMRC's position is that the information notice asked for information and documents which were statutory records, and that therefore there was no right of appeal against the information notice. Mr Stewart did not consider compliance with the information notice could breach the DPA. He did not consider HMRC was conducting a fishing expedition. He accepted that there was partial compliance with the information notice; in particular, he accepted requests 2 and 1011 had been complied with.
[9] The power for HMRC to obtain information from taxpayers is contained in Sch 36. HMRC had relied on paragraph 1 of Sch 36 to issue the information notice in question and the penalty was imposed on the appellant company under paragraph 39 of Sch 36. It provided:
39
(1) The paragraph applies to a person who
a) fails to comply with an information notice, or
b)
(2) That person is liable to a penalty of 300.
[10] There is no liability unless there has been a failure to comply. Mr Thomas did not suggest that there had been any compliance with the information notice other than compliance with paragraphs 2, 10 and 11. HMRC accepted that this information had been provided.
[11] So far as paragraph 1 of the information notice was concerned, this was a request by HMRC for confirmation of the basis on which the appellant company claimed to meet the small company test for exemption from audit, and in particular if the company relied on its turnover and number of employees.
[12] I find Mr Thomas accepted that the company had not complied with this request because at the hearing before me he volunteered compliance, saying that the company did rely on its turnover and number of employees for its claimed qualification to be exempt from the liability to have its accounts audited.
[13] There was no suggestion the company had ever complied with the remaining information requests (39). I find therefore that there was a failure to comply with points 1 and 39 of the information notice, although I accept point 1 was belatedly complied with on 22 December 2014. Partial non compliance is non compliance for the purpose of paragraph 39(1)(a) of Sch 36. In so far as it was Mr Thomas' case that partial compliance satisfied the information notice, I reject it.
[14] Non-compliance with part of an information notice exposes the company to the 300 penalty for non-compliance, but was the notice served on 5 March 2013 a valid information notice?
[15] I consider that paragraph 39 presupposes that it is only a valid information notice for which a taxpayer is penalised for non-compliance with; so if an information notice is invalid and set aside on appeal, there can be no penalties for not complying with it. The information notice at issue in this appeal has not been set aside but the appellant's main ground of appeal is that it has challenged its validity, and if that challenge is successful, the notice will be set aside. Certainly paragraph 46 of Sch 36 which sets out the time limits in which HMRC can assess penalties presupposes that penalties would be imposed after an appeal against an information notice had been resolved.
[16] But there is no right of appeal against all information notices. Sch 36 only gives the taxpayer a limited right to appeal against an information notice issued under paragraph 1 as it provides at paragraph 29 as follows:
29
(1) Where a taxpayer is given...
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