Thurgood v Slarke (HM Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judgment Date | 01 April 1971 |
| Date | 01 April 1971 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
Income tax - Procedure - Appeal - Case Stated - Questions of fact on validity of assessment not raised before Commissioners - Cannot be raised in High Court.
Assessments to income tax under Schedule D for the years 1947-48 to 1955-56 were made on the Appellant, an experienced man of business, in respect of bank deposit interest and rents arising in Australia. His returns of income for those years had shown the entry "None" for untaxed income from foreign possessions; the return forms contained a direction that such income was to be entered whether or not received in the United Kingdom. The returns were prepared by a qualified accountant who had died in 1956 and who, according to the Appellant, had advised him that since the income in question had suffered tax in Australia and had not been received in the United Kingdom it need not be included. In May 1957 the Appellant's new accountants advised the Inspector of Taxes that there might have been omissions in respect of the Australian income, and a back duty investigation ensued in which the Appellant fully co-operated. No other omissions were found. The assessments for the years before 1953-54 were made after the normal time limit on the footing that 1953-54 was the normal year for the purposes of s.51, Finance Act 1960; the General Commissioners accepted the evidence of the Inspector of Taxes that the assessment for that year was made on 4th April 1960, although the notice of assessment was issued on 7th April 1960.
On appeal, it was contended for the Appellant (a) that there was no evidence that the assessment for 1953-54 was made before 6th April 1960, or (b) that it was made for the purpose of making good a loss attributable to fraud, wilful default or neglect within the meaning of s.51, Finance Act 1960, and (c) that it could not as a matter of law have been so made, since s.51 had not then been passed. The General Commissioners having rejected these contentions, it was further contended for the Appellant (d) that on discovering the omissions in his returns he had remedied them without unreasonable delay and no proceedings based on those omissions were competent. The Commissioners found that fraud or wilful default was not established but neglect was proved and confirmed the assessments in agreed figures. The Appellant demanded a Case.
The Case Stated did not recite that the assessment for 1947-48, which was made in 1967, had been made with the leave of an Income Tax Commissioner nor give the dates on which the assessments for 1954-55 and 1955-56 were made, those questions not having been raised by the Appellant at the appeal meeting. In the High Court, in addition to maintaining all his
contentions before the Commissioners, the Appellant challenged the assessment for 1953-54 on the ground that it did not state that it was made on the ground of neglect or default and, alternatively, by reference to s.55, Income Tax Act 1952, on the ground that it was made after the omissions had been rectified, and the assessments for 1947-48, 1954-55 and 1955-56 on the ground that the Case did not show them to have been validly madeHeld, (1) that there was ample evidence to justify the Commissioners' finding of neglect;
(2) that the assessment for 1953-54, having in fact been made for the purpose of making good a loss of tax attributable to fraud, wilful default or neglect, was the assessment for the normal year although made before the passing of s.51, Finance Act 1960;
(3) that the said assessment (as also in consequence those for the preceding years) was validly made;
(4) that s.55, Income Tax Act 1952, applied only to penalty proceedings;
(5) that it was not open to the Appellant to challenge the validity of the 1947-48, 1954-55 and 1955-56 assessments on issues of fact which he had not raised before the Commissioners.
Stated under the Income Tax Act 1952, s.64, by the Commissioners for the General Purposes of the Income Tax for the Division of Braughing for the opinion of the High Court of Justice.
1. At a meeting of the Commissioners for the General Purposes of the Income Tax for the Division of Braughing held at the Police Court, Ware, Hertfordshire, on 30th May 1969 for the purpose of hearing appeals, Mr. W.L. Thurgood, of "Longridge", Pepper Hill, Great Amwell (hereinafter referred to as "the Appellant"), appealed against assessments under Schedule D of the Income Tax Act 1952 as follows:
Amount of |
|||||
Year of assessment |
Source of income |
assessment |
|||
£ |
|||||
1942-43 |
… |
… |
… |
Australian income |
200 |
1943-44 |
… |
… |
… |
do. |
220 |
1944-45 |
… |
… |
… |
do. |
206 |
1945-46 |
… |
… |
… |
do. |
206 |
1946-47 |
… |
… |
… |
do. |
207 |
1947-48 |
… |
… |
… |
do. |
157 |
1948-49 |
… |
… |
… |
do. |
500 |
1949-50 |
… |
… |
… |
do. |
500 |
1950-51 |
… |
… |
… |
do. |
500 |
1951-52 |
… |
… |
… |
do. |
500 |
1952-53 |
… |
… |
… |
do. |
500 |
1953-54 |
… |
… |
… |
do. |
200 |
1954-55 |
… |
… |
… |
do. |
200 |
1955-56 |
… |
… |
… |
do. |
800 |
1956-57 |
… |
… |
… |
do. |
850 |
1957-58 |
… |
… |
… |
do. |
800 |
1958-59 |
… |
… |
… |
do. |
600 |
1959-60 |
… |
… |
… |
do. |
500 |
1960-61 |
… |
… |
… |
do. |
200 |
1961-62 |
… |
… |
… |
do. |
500 |
2. The questions at issue were: (1) whether the assessments made on the Appellant in respect of the years 1942-43 to 1946-47 inclusive under the provisions of the proviso to s.47(1) of the Income Tax Act 1952 had been properly so made by reason of fraud or wilful default committed by him or on his behalf; (2) whether the assessments made on him in respect of the years 1947-48 to 1955-56 inclusive under the provisions of the said proviso, and alternatively under those of s.51 of the Finance Act 1960, had been properly so made by reason of fraud or wilful default committed by the Appellant or on his behalf or of the Appellant's neglect. It was agreed between the parties that the assessments also before us for the years 1956-57 to 1961-62 should be adjourned generally.
3. The following documents were produced:
(1) to (11) The Appellant's returns of income for each of the years 1945-46 to 1955-56 inclusive.
(12) The Appellant's balance sheet as at 31st December 1942.
(13) The Appellant's private income balance sheet as at 5th April 1955.
(14) Notice of assessment 1953-54 dated 7th April 1960.
(15) Notice of assessment 1947-48 dated 18th September 1967.
(16) Letter dated 25th March 1941 from the Chancellor of the Exchequer to the Appellant.
(17) Letter dated 6th May 1957 from Messrs. Reads Cocke & Watson (the Appellant's accountants) to H.M. Inspector.
(18) Letter dated 5th March 1964 from Messrs. Reads Cocke & Watson to H.M. Inspector.
(19) Letter dated 26th March 1964 from H.M. Inspector to Messrs. Reads Cocke & Watson.
(20) Letter dated 28th February 1969 from Messrs. Reads & Co. to H.M. Inspector.
The above documents are not appended to the Stated Case but are available for inspection if required.
4. Counsel for the Appellant (Mr. D. Marcus Jones) submitted as a preliminary point that the assessment for 1953-54 purporting to have been made under s. 51 of the Finance Act 1960 had not been validly so made.
It was accepted that in relation to all the assessments before us it was for the Inspector of Taxes to satisfy us that the provisions of s. 47 of the Income Tax Act 1952 and s. 51 of the Finance Act 1960, as appropriate, had been complied with. We therefore decided to hear the evidence of the Inspector of Taxes on all the matters before us before ruling on Counsel's submission.
5. The following facts were admitted:
(2) The Appellant was resident in the United Kingdom in all the years the subject of these appeals.
(3) In each of the years in question income arose to him in Australia. This income was derived from rents and deposit interest.
(4) This Australian income was not included in the taxpayer's returns of income (documents (1) to (11)).
(5) The Appellant employed a qualified accountant, Mr. H.T. Woodard, to prepare the returns for the years 1945-46 to 1955-56 inclusive. Each of these returns had been signed by the Appellant. Mr. Woodard retired in November 1956 and died shortly afterwards, and thereafter the Appellant employed Messrs. Reads Cocke & Watson, chartered accountants, who subsequently became Messrs. Reads & Co.
(6) No Australian income was remitted to this country.
6. Mr. G.V. Slarke, the Respondent Inspector of Taxes, gave evidence. We accepted the following facts:
(2) Each of the returns, documents (1) to (11), contained a paragraph on page 2 headed "Dominion and Foreign Securities and Possessions, not subjected to United Kingdom Income Tax at the source", and in each case the word "None" was entered on behalf of the Appellant. The relevant direction on page 2 bore the following words: "Enter the amount that arose in the year whether or not received in the United Kingdom".
(3) Balance sheets, of which documents (12) and (13) are examples, showing capital employed outside the Appellant's business of coach-builder had been supplied to the Inspector annually for years 1942 to 1955. These showed an item "Commonwealth Bank of Australia" as a private asset, but it had not been shown as a deposit account, nor had interest arising thereon been shown in "Income from investments" credited to the Appellant's private capital account on the liabilities side of the balance sheets. The amount with the bank had been shown as £10,000 at 31st December 1942, rising to £79,500 at 5th April 1955. Only a fraction of the £79,500 was on deposit.
(4) On 6th May 1957 Messrs. Reads & Co. wrote the letter document (17) to the Inspector of Taxes informing him that there might be omissions from the Appellant's returns of income of deposit interest arising from a bank account in Australia. They also claimed life assurance relief for policies taken out in Australia in 1951.
(5) It had subsequently been ascertained that the Appellant was entitled to United Kingdom tax relief in respect of the premiums amounting to some £7,000 per annum on these policies.
(6) The assessments for the years...
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