Winstanley (as personal representative of Winstanley deceased)
| Jurisdiction | UK Non-devolved |
| Judgment Date | 22 March 2018 |
| Neutral Citation | [2018] UKFTT 154 (TC) |
| Date | 22 March 2018 |
| Court | First Tier Tribunal (Tax Chamber) |
[2018] UKFTT 0154 (TC)
Judge Richard Thomas
Michael Firth, instructed by RfM Chartered Accountants, appeared for the appellant
Patrick Boch, solicitor-advocate, instructed by Solicitor and Counsel-General for HM Revenue and Customs appeared for the respondents
Income tax – TMA 1970, s. 59B(4A) – Withholding repayment – TMA 1970, s. 28A – Closure notice –TMA 1970, s. 40 – Smith (Surveyor of Taxes) v Williams (1921) 8 TC 321 – Drown (as executors of Leadley deceased) [2014] TC 04007 – Morris v R & C Commrs [2007] BTC 448.
The issue for the First Tier Tribunal (FTT) was whether TMA 1970, s. 28A(1) permitted a closure notice to be given to personal representatives of a deceased taxpayer. The FTT found that denying the ability to conclude an enquiry would go against Parliament's purpose in enacting TMA 1970, s. 28A.
The appeal by the widow and personal representative (as executor of his will) of Mark Winstanley, was against two closure notices. Winstanley had used the Stony Heating avoidance scheme in 2006–07 and Working Wheels avoidance scheme in 2007–08. TMA 1970, s. 9A enquiries had been opened into the returns for those years. The Upper Tribunal had found that the Stony Heating scheme did not work and Winstanley did not trade for the purposes of the Working Wheels scheme. Closure notices along with computations were sent to the agent on 12 January 2016. On the same day, letters were sent to Winstanley stating it was a closure notice under TMA 1970, s. 28A(1) and (2).
An appeal was made. The appeal asked for postponement of tax and minor queries raised relating to addressee and intended recipient. Furthermore, given the demands for tax were more than 6 years after the death, it was considered that the tax could not be demanded.
It was suggested that TMA 1970, s. 40 limits the time to issue assessments to personal representatives to 4 years from the date of death. As such it was contended that HMRC were out of time. HMRC contended that TMA 1970, s. 40 only applied to TMA 1970, s. 29 assessments not TMA 1970, s. 9A enquiries or the conclusions given under TMA 1970, s. 28A.
The Appellant submitted that HMRC had not issued valid closure notices. The reasoning was:
- A notice couldn't be provided to anyone other than the taxpayer;
- where Parliament intended to extend a provision to a personal representative it did so expressly;
- TMA 1970, s. 28A did not extend to a personal representative;
- Parliament had provided a distinct regime for the taxation of personal representatives: TMA 1970, s. 74 and TMA 1970, s. 40.
HMRC disputed the Appellant's position on the following grounds:
- TMA 1970, s. 74 provides that personal representatives are liable for the tax chargeable on the deceased;
- Personal representatives stand in the shoes of the taxpayer;
- TMA 1970, s. 28A(1) should be interpreted purposively;
- If a literal interpretation were required, it cannot prevent a closure notice being issued to the personal representatives of the deceased;
- If a closure notice could not be issued to the personal representatives, enquiries could never be closed; and
- Issuing an assessment in place of a closure notice would not resolve the issue of an enquiry that can never be closed.
The Appellant subsequently submitted that TMA does not provide for treating the personal representatives as the taxpayer, HMRC had remedies under TMA 1970, s. 29(4) or (5)(a), and they were limited to considering enquiries within 4 years.
The Judge requested the parties to consider the case of Smith (Surveyor of Taxes) v Williams (1921) 8 TC 321 and provide further submissions. In that case the High Court held that the death of a person does not prevent the Crown from seeking to establish the correct amount of tax under the procedural provisions of the then Income Tax Acts.
The FTT agreed with HMRC that:
- The purposes of s. 28A is to enable enquiries to be brought to a conclusion;
- The normal time limits for assessment do not apply to TMA 1970, s. 9A enquiries – Morris v R & C Commrs [2007] BTC 448;
- Parliament had decided that the protection for the taxpayer is TMA 1970, s. 28A(4); and
- Denying the ability to conclude an enquiry would go against Parliament's purpose in enacting s. 28A.
The detailed analysis provided in the judgement sets out the approach adopted by the FTT to analyse the disputed application of legislation and identified several other sections (i.e. TMA 1970, s. 43C) which would contradict the Appellant assertions.
[1] This was an appeal by Mrs Sara Winstanley (“the appellant”), the widow and personal representative (as executor of his will) of Mark Winstanley, against conclusions stated and amendments made by two closure notices issued by an officer of the respondents (“HMRC”).
[2] The matters set out below are taken from the hearing bundle for the case. They are not in dispute and I find them as fact.
[3] On 5 August 2008 Mrs C Higham, an officer of HMRC in Local Compliance, wrote to Mark Winstanley informing him that she was opening an enquiry into his 2006–07 tax return. The enquiry concerned “the transactions surrounding your share disposal and capital loss”, and pending completion of the enquiry no repayment would be made, this withholding of the repayment being, she said, in accordance with s 59B(4A) Taxes Management Act 1970 (“TMA”).
[4] A copy of the letter was sent to Mark Winstanley's agent, HWCA Ltd, together with a further letter expressly saying that the enquiry was being made under s 9A TMA and requesting a substantial number of documents together with a large amount of other information (if that information was not apparent from the documents).
[5] On 27 October 2009 it seems that a Mrs T D Madeley-Jones of Local Compliance wrote to Mark Winstanley informing him that she was checking his 2007–08 return. No copy of this letter is in the bundle, but a letter to Haines Watts (Lancashire) Ltd is, saying that this check was also under s 9A TMA but that no information was being sought. She referred to a “scheme number” and a trade in second hand cars in which Mark Winstanley had made a loss which he had claimed to use.
[6] On 15 February 2010 Mark Winstanley died.
[7] On 9 December 2015 (nearly 6 years later) Chris Ashton, an officer of HMRC Counter-Avoidance, wrote to Haines Watts (Preston) Ltd1 (“HWP”) with a heading “Mr M Winstanley (deceased)”. The letter stated that Mr Winstanley had used “the Stony Heating avoidance scheme in 2006–07 and Working Wheels avoidance scheme in 2007–08” and that s 9A TMA enquiries had been opened into the returns for those years.
[8] In relation to Stony Heating the letter informed HWP that the Upper Tribunal (“UT”) had held that the scheme did not work2 and that the allowable loss was 8p per share. On that basis Mark Winstanley's loss was £3.44.
[9] In relation to Working Wheels the letter informed HWP that the “Courts” do not accept that Mr Winstanley was trading, so no losses were allowable.
[10] Chris Ashton attached calculations of the additional tax liability arising from the removal from Mark Winstanley's returns of the losses claimed, and warned that interest would run from the original due date.
[11] This letter was expressed not to be a closure notice but an intimation of the intended issue of such a notice and of the conclusion of enquiries regarding both schemes on 8 January 2016 to “allow time if there [are] outstanding issues or preparations required regarding Mr Winstanley's estate”.
[12] On 12 January 2016 Chris Ashton sent a letter to HWP attaching copies of the closure notices for both years, with calculations and printouts of Mark Winstanley's self-assessments showing the total amounts due.
[13] On the same day Chris Ashton also sent two letters addressed to “Mr M Winstanley” at an address in Ormskirk, Lancs with the greeting “Dear Sir or Madam”. Each letter said it was a closure notice issued under s 28A(1) and (2) TMA.
[14] The letter for 2006–07 under the heading “My decision” said that the Stony Heating scheme did not work and the loss on disposal of the shares in Stony Heating was reduced to £3.44, which had been rounded up to £4. The letter also said that Mark Winstanley's tax return had been amended to show additional tax of £136,002.23.
[15] The letter for 2007–08 under the heading “My decision” said that the Courts3 did not accept he was trading and no loss had been sustained in trading. The letter also said that Mark Winstanley's tax return had been amended to show additional tax of £183,523.05.
[16] On 8 February 2016 Steve Towler of RfM Chartered Accountants (“RfM”) faxed an appeal against both notices and asked for postponement of all tax payable. The fax contained a copy of a letter of 3 February from RfM asking:
- Why both letters were addressed to Mr Winstanley and not his widow, as HMRC were aware of his death 6 years before?
- Whether the letters were actually posted, as there were a number of errors in the address line, and if they were posted who would be the recipient?
The fax said that since the demands for tax were made 6 years after Mr Winstanley's death, RfM did not consider HMRC could demand the tax and that they should be cancelled. No suggestion was made that HMRC were wrong to conclude that the decisions of Tribunals or Courts in relation to the two schemes were wrong or inapplicable to the circumstances of Mr Winstanley.
[17] On 12 February Chris Ashton replied to the letter of 3 February, saying that the letters were addressed to Mr Winstanley as the enquiries were into his personal tax returns. HMRC did know that his widow was the executor and the letter should have been addressed to her.
[18] Copies were also sent to HWP who were “still listed as his personal representative” and Chris Ashton asked if RfM were now Mr Winstanley's personal representative as well as his agent.
[19] In addition, Chris Ashton did not believe the notices were...
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