Thorne v General Comrs. of Income Tax for Sevenoaks
| Jurisdiction | England & Wales |
| Judgment Date | 11 May 1989 |
| Date | 11 May 1989 |
| Court | Chancery Division |
Chancery Division and Queen's Bench Division.
Morritt J.
Mr. Graham Aaronson Q.C. and Mr. Kevin Prosser (instructed by Franks Charlesley & Co.) for the taxpayer.
Mr. Andrew Thornhill Q.C. (instructed by the Solicitor of Inland Revenue) for the Crown.
The following cases were referred to in the judgment:
Dick v. Piller ELR[1943] 1 K.B. 497
Maxwell v. Keun & Ors. ELR[1927] 1 K.B. 645
Ottley v. Morris (H.M.I.T.) TAX(1978) 52 T.C. 103
Rose v. Humbles (H.M.I.T.) TAX(1971) 48 T.C. 103
Penalties - Appeal - Judicial review - Application to adjourn hearing before Commissioners on ground of illness refused - Penalties awarded - Finding of neglect in submitting late and incorrect returns - Default interest imposed from earlier date due to finding of neglect - Whether adjournment should have been granted - Taxes Management Act 1970 section 88 section 100 section 118 subsec-or-para (2)Taxes Management Act 1970, sec. 88, 100, 118(2).
This was an appeal against an award of penalties imposed on the taxpayer in his absence by the General Commissioners for Sevenoaks. The appeal was heard together with an application for judicial review seeking an order quashing the decision of the Commissioners to refuse an adjournment of the penalty proceedings.
In about 1973 the taxpayer sold a business for a substantial sum which he deposited with a bank. He was late in submitting returns for the years 1972-73 to 1979-80 and when he did so they were incomplete. The Revenue raised assessments on him which gave rise to a total tax liability of £1.2m which was paid with interest of some £34,000 pursuant to the Taxes Management Act 1970 section 86Taxes Management Act 1970, sec. 86.
A summons for penalties under Taxes Management Act 1970 section 100sec. 100 of the 1970 Act was originally listed for hearing before the General Commissioners for Sevenoaks on 12 February 1987 but was adjourned by agreement with the inspector on the ground that the taxpayer was too ill to attend the hearing to give evidence.
The summons was listed again for hearing on 9 April when the taxpayer's solicitor appeared before the Commissioners and applied for a further adjournment which was opposed. He produced a medical certificate stating that the taxpayer was still too ill to attend but he was unable to say how long it would be before the taxpayer would be well enough due to the nature of his illness. In those circumstances the Commissioners refused the application and the hearing proceeded.
At a resumed hearing on 4 June the Commissioners found that the taxpayer had been guilty of neglect. Penalties amounting to £333,148 were claimed but the Commissioners awarded the lesser amount of £120,444.
As a result of the finding of neglect the Commissioners signed a certificate under the Taxes Management Act 1970 section 70 subsec-or-para (3)Taxes Management Act 1970, sec. 70(3)imposing interest pursuant to Taxes Management Act 1970 section 88sec. 88 (which ran from an earlier date) amounting to £269,057 instead of the £34,000 which had been paid under section 86sec. 86.
The inspector submitted that this was a serious case of neglect. All the facts had been pleaded in correspondence and it was not necessary for the presentation of the taxpayer's case that he should give evidence. The reasons given for inaccurate and late returns were overwork, the death of his father, separation from his wife and that he had relied on erroneous information provided by his bank omitting interest on £56,000 paid to him. None of those reasons constituted an excuse for his neglect within Taxes Management Act 1970 section 118 subsec-or-para (2)sec. 118(2) of the 1970 Act. Having signed the return, the taxpayer could not rely on the bank's error.
Held, , allowing the taxpayer's appeal and granting relief by way of judicial review:
1. It did not follow that, if it could not be said with certainty when a taxpayer would be fit to attend a hearing, an adjournment had to be refused. The Commissioners erred in principle in failing to consider whether in all the circumstances, including the likelihood of the taxpayer's recovery and the size of the the claims against him, their refusal would give rise to an injustice.
2. It was at least arguable that if the taxpayer genuinely and reasonably believed and relied on information provided by the bank, that could constitute a reasonable excuse within Taxes Management Act 1970 section 118 subsec-or-para (2)sec. 118(2) and could only be dealt with by the taxpayer himself in evidence so that his presence was necessary for the proper presentation of his case.
3. The imposition of default interest under Taxes Management Act 1970 section 88sec. 88, against which there was no appeal, depended on the finding of neglect. The taxpayer had had no opportunity to dispute the question of negligence based on what the bank had told him. He was also denied the opportunity to satisfy the Commissioners that in their discretion they should have awarded a smaller penalty. Accordingly an injustice had been done to the taxpayer.
The taxpayer appealed against the decision of the General Commissioners for Sevenoaks made on 4 June 1987 awarding penalties totalling £120,444. The grounds of the appeal were:
1. That the Commissioners erred in law in refusing to adjourn the hearing of the penalty proceedings when the taxpayer was prevented by sickness from attending to give evidence.
2. That the penalties awarded by the Commissioners were excessive in amount being disproportionate to any fault on the part of the taxpayer.
3. That the Commissioners had erred in law in finding that the taxpayer had been guilty of negligence.
The taxpayer also applied on similar grounds for judicial review of the Commissioners' decision made on 9 April 1987 refusing an adjournment of the proceedings and of the decision of 4 June in so far as it related to the Commissioners signing a certificate under the Taxes Management Act 1970 section 70 subsec-or-para (3)Taxes Management Act 1970, sec. 70(3) that assessments raised on the taxpayer carried interest under Taxes Management Act 1970 section 88sec. 88.
Morritt J.: On 9 April 1987 the General Commissioners for Sevenoaks, Kent, refused an application made on behalf of the taxpayer, Mr. Thorne, for an adjournment. Accordingly the hearing proceeded on that day and on 4 June 1987, when the Commissioners gave a certificate under Taxes Management Act 1970 section 70 subsec-or-para (3)sec. 70(3) of the Taxes Management Act 1970 for interest under Taxes Management Act 1970 section 88sec. 88 of that Act in the sum of £234,314 and awarded penalties underTaxes Management Act 1970 section 100sec. 100 of that Act in the sum of £120,444.
No appeal lies from the decision of the Commissioners giving a certificate for interest and the application before me is by way of judicial review. It is alleged that the refusal of the adjournment constituted a breach of natural justice and an error of law in thatTaxes Management Act 1970 section 70 subsec-or-para (3)sec. 70(3) confers on the taxpayer a statutory right to appear and be heard on the application. So far as the award of penalties is concerned Taxes Management Act 1970 section 100 subsec-or-para (6)sec. 100(6) confers on...
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