TC03552: Norman Archer
| Jurisdiction | UK Non-devolved |
| Judgment Date | 06 May 2014 |
| Neutral Citation | [2014] UKFTT 423 (TC) |
| Date | 06 May 2014 |
| Court | First Tier Tribunal (Tax Chamber) |
[2014] UKFTT 423 (TC)
Judge Anne Redston, Mr Duncan McBride
Mr Solad S Mohammed of Abu Umar & Co appeared for the Appellant
Mr Paul O'Reilly, of HM Revenue and Customs Appeals and Reviews Unit, appeared for the Respondents
Income tax - Application for permission to make late appeals - Principles to be applied by the Tribunal - New CPR 3.9 - Whether efficiency, proportionate cost and compliance with rules outweighs other circumstances - Mitchell v Newsgroup Newspapers Ltd[2014] 1 WLR 795, McCarthy & Stone (Developments) Ltd v R & C Commrs[2014] BVC 504 and Chartwell Estate Agents Ltd v Fergies Properties SA[2014] EWCA Civ 506 considered - Held, Tribunal to balance the factors giving extra weight to compliance etc - Delay of over a year in this case - No reasonable excuse - Taxpayer and adviser both responsible for delay - Disability of taxpayer - Merits of little weight - Consequences for HMRC - Balancing exercise - Application dismissed.
The First-tier Tribunal (FTT) has dismissed a taxpayer's application for permission to make late appeals against two enquiry closure notice amendments and three discovery assessments finding that the factors against granting permission in terms of the length of the delay by the taxpayer in making the appeal and lack of reasons for it and costs in time and money to HMRC if the appeal were to proceed outweighed the factors in favour of giving permission, which consisted of the taxpayer's increased reliance on his accountant as a result of his disability and the possibility that the appeal might succeed, neither of which carried any significant weight.
Mr Archer (the appellant) applied to the FTT for permission to appeal two enquiry closure notice amendments and three discovery assessments following HMRC's refusal to accept his appeal on the grounds that it was over nine months late without reasonable excuse.
In considering whether to grant permission for Mr Archer to appeal, the FTT initially noted their obligation to have regard to the overriding objective in the Tribunal Procedure Rules (First-Tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273), r. 2, to deal with the case fairly and justly which, following O'Flaherty v R & C CommrsTAX[2013] BTC 1814, meant they must "consider all material factors, including the reasons for the delay, whether there would be prejudice to HMRC if the taxpayer were to be permitted to appeal out of time, and whether there would be demonstrable injustice to the taxpayer if permission were not to be given" and "conduct a balancing exercise in reaching its conclusion".
The FTT then considered the extent to which they were obliged to follow the new Rule 3.9 of the Civil Procedure Rules 1998 (CPR) (SI 1998/3132) as interpreted by Mitchell v News Group Newspapers Ltd [2014] EWHC 879 (QB), considering also the case of McCarthy & Stone (Developments) Ltd v R & C CommrsVAT[2014] BVC 504 and concluded that they were to give greater weight to the need to observe time limits and other rules than was the case before the new CPR 3.9.
Turning to the various factors of the case itself, the FTT noted that there had been a number of delays over the course of the appeal and a contradiction between one of the reasons put forward by Mr Mohammed (Mr Archer's accountant), that Mr Archer had been hospitalised for part of the period, and Mr Archer's own evidence, which was that he had only visited hospital twice a year for check ups. The FTT concluded that there was no weight to be attached to Mr Archer or Mr Mohammed having been "busy" as a reason for the delay and that even if Mr Mohammed had been unable to work during Ramadan (which they doubted), this would explain only two weeks of the delay. The FTT took into account that HMRC had provided numerous helpful and detailed letters explaining when and how to appeal and concluded that the extent of the delay and lack of reasons weighed heavily against Mr Archer.
The FTT then considered the consequences for Mr Archer of refusing permission; that if permission were refused Mr Archer would be unable to challenge the significant sum of tax at stake. The FTT noted that in this context, weight ought to be given according to the merits of the appeal but as Mr Mohammed had not given even an outline of the evidence he intended to put forward to demonstrate that the assessments were too high, there was very little weight that could be given. The FTT concluded that although granting permission might result in a lower assessment, it was equally possible that it might not.
The FTT also placed little weight on Mr Archer's greater reliance on his adviser due to his impaired sight finding that he had still been aware of the course of the enquiry and to the extent he was not fully informed was by choice.
The FTT gave weight against Mr Archer to the fact that HMRC would have to re-open five closed years, allocate staff to dealing with the case and incur other consequential costs if the appeal were to proceed, however, Mr Archer's behaviour of non-compliance over the course of the enquiry was not to be weighed in the balance because the proper route for dealing with a lack of co-operation during an enquiry was through the penalty system and penalties had been levied.
Overall, therefore, the FTT found that the balancing exercise weighed strongly against granting permission and there was no need to even consider giving greater weight to the breach of the rules following new CPR 3.9 because the decision would be the same even in the absence of new CPR 3.9.
This case highlights the worst case scenario where appeals are not made on a timely basis. The taxpayer took some nine months to appeal against a number of enquiry closure notice amendments and discovery assessments and could not put forward any satisfactory reason for the delay. The FTT confirmed that their approach to dealing with applications for permission to appeal late will be to carry out a balancing exercise considering all factors and weighting them for or against giving permission, with greater weight being given to compliance with time limits and other rules. Accordingly, as there was no real excuse for the length of the delay and the appeal was as likely to fail as succeed, they rejected the application.
[1]This was Mr Archer's application for permission to make late appeals against closure notices amending his self-assessment tax returns for 2005-06 and 2006-07, and discovery assessments for the three years 2007-08 to 2009-10. The total extra tax was 28,708.96. Having considered the evidence and the relevant case law, the Tribunal refused Mr Archer's application.
[2]HMRC supplied a bundle of correspondence between the parties. Mr O'Reilly also provided a chronology of the HMRC enquiry into Mr Archer's SA tax returns for 2005-06 and 2006-07. Mr Archer gave oral evidence on oath and was cross-examined by Mr O'Reilly. We found him to be a credible witness, other than in respect of his evidence about communications between him and Mr Mohammed, which was inconsistent. We return to this further below.
[3]On the basis of this evidence, the Tribunal makes the following findings of fact.
[4]Mr Archer is self-employed businessman who suffers from diabetes. This caused him to lose his vision in one eye over ten years ago; the other eye is severely myopic. He can read large print with some difficulty. He has two hospital check-ups a year for his eye problems, but remains able to drive and run his business.
[5]On 3 November 2007 HMRC opened enquiries into Mr Archer's 2005-06 tax return. They asked for certain business records, which were not provided. On 9 April 2008, HMRC imposed a penalty.
[6]On 15 April 2008, Mr Archer made contact with HMRC by telephone and advised that he had difficulties with his sight. From then onwards HMRC issued all letters in large print. Mr Archer told us, and we accept, that he can always identify a letter from HMRC by the heading, and he invariably sends these letters to his accountant, Mr Mohammed.
[7]Between April and December 2008, HMRC tried several times to arrange a meeting with Mr Archer but he was never available to meet with them at the times proposed.
[8]On 19 December 2008, HMRC opened an enquiry into Mr Archer's 2006-07 SA return. Several further attempts were made to contact Mr Archer in the period from January to March 2009 with a view to arranging a meeting, but no response was received.
[9]On 14 April 2009 Mr Mohammed replied. This was the first written communication sent to HMRC by or on behalf of Mr Archer in relation to either of the years under enquiry.
[10]On 27 July 2009 HMRC requested copies of Mr Archer's personal bank statements, because the lodgements in his business bank accounts were in excess of the amounts declared as turnover in his SA returns.
[11]On 17 August 2009 Mr Archer told the HMRC case worker that he had another property, which was rented out. On 23 September 2009 HMRC wrote asking for further details about the rented property and made a further request for a meeting.
[12]On 29 September 2009 Mr Archer provided HMRC with a signed bank mandate allowing them to obtain copies of his personal bank statements.
[13]On 17 June 2010, HMRC issued a Notice under Finance Act 2008, schedule 36Schedule 36 ("the Schedule 36 Notice") to obtain details of Mr Archer's let property. On 16 August 2010, Mr Mohammed told HMRC that his let property had been purchased on 28 June 2006 and therefore was irrelevant to the enquiry into Mr Archer's 2005-06 return. On 25 August 2010, HMRC informed Mr Mohammed that the Land Registry records showed that the property had been purchased by Mr Archer in 2003 and remortaged in 2006.
[14]At some point between August and October 2010, HMRC issued a 300 penalty for Mr Archer's failure to produce the records relating to his let property which were the subject of the schedule 36Schedule 36 Notice.
[15]In October 2010 Mr Archer advised HMRC...
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