Identifiable “flesh and blood officer” not required to issue self-assessment
Joshua Carey, led by Aparna Nathan QC, was instructed by HM Revenue and Customs in another successful and significant judgment of the Upper Tribunal (Tax and Chancery Chamber) (“UT”) in respect of the Self-Assessment penalty regime. The Commissioners for HM Revenue and Customs -v- Nigel Rogers and Craig Shaw [2019] UKUT 0406 (TC) was an appeal by the Revenue in respect of four issues:
- Whether the First-tier Tribunal (Tax Chamber) (“the FTT”) had jurisdiction to consider whether a valid Notice to File pursuant to s8 of the Taxes Management Act 1970 (“TMA”) had been issued to them for the purposes of a Schedule 55 Penalty;
- Whether the FTT wrongly applied a literal interpretation of s8 of the TMA by concluding that it required an officer to be identified when a s8 Notice to File was issued;
- Whether the FTT was wrong to conclude that s8(1) of the TMA required a s8 Notice to File to be issued by a “flesh and blood” officer rather than a computer; and
- Whether the FTT had denied the Revenue procedural fairness in arriving at its decision.
The First Issue – Jurisdiction and validity of the Notice to File
Shortly before the UT heard the Appeal, a differently constituted UT heard HMRC -v- Goldsmith [2019] UKUT 325 (TCC) (“Goldsmith”) which dealt with the issue of validity. The UT noted that:
“In that case [Goldsmith], the taxpayer wished to argue that a notice HMRC had given did not meet the requirements of s8 because it was not given “for the purpose of establishing the amounts in which a person is chargeable to income tax and capital gains tax for a year of assessment”. Therefore, the taxpayer argued, he could not be liable to a penalty under Schedule 55 for a failure to comply with that notice.”
The Revenue argued that Goldsmith was not to be followed because (i) it was plainly wrong, and (ii) that s8B of the TMA which was not referred to in Goldsmith. It was said the significance of s8B was that it demonstrated that, reading the statutory code as a whole, Parliament could not have intended the FTT to have jurisdiction to determine the validity of a s8 Notice to File in an appeal against a Schedule 55 Penalty appeal.
The UT was not persuaded and dismissed this ground of appeal noting:
“24. Indeed, we find this to be an even clearer case than Goldsmith. In this appeal, the taxpayers are arguing that there is a fundamental problem with the s8 notice itself (namely that it was not given by an officer of HMRC). There is no question of any public law element in that question; it simply involves the question whether the notice was “given… by an officer of the Board” in the requisite statutory sense. We consider it to be clear that the FTT has power (for the reasons given in Goldsmith) to consider that alleged defect as part of its determination whether the taxpayers should be penalised for failing to comply with the requirements of that notice.”
The Second and Third Issues – An identifiable, “flesh and blood” officer
The UT went on to deal with grounds 2 and 3 together. It was argued that the FTT’s conclusions that for a s8 Notice to File to be given “by an officer of the Board”, a named officer either had to sign the s8 Notice to File or had to be made clear in some other way that a particular named officer was “giving” that s8 Notice to File was plainly wrong.
The UT agreed with the Revenue’s submissions in respect of grounds 2 and 3. It noted:
“32. In our judgment, properly construed, s8 does not impose a requirement that an officer of the Board is identified in the notice as the giver of the notice. Rather, it imposes a substantive requirement that the giving of a notice must have been under the authority of an officer of HMRC. Therefore, if a police constable, for example, purported to require a taxpayer to submit a tax return that would not be a lawful request under s8 (unless the police constable happened also to be an officer of HMRC). Instead, the requirement is that whoever requires the notice to be given, whether identified or not, has the status of an HMRC officer.
…
- Against that background, s8 cannot be construed as requiring an identified officer to give a notice requiring a return to be given to that very officer.”
The Fourth Issue – Procedural Fairness
The UT spent considerable time dealing with the FTT’s approach to deciding an issue against the Revenue without first giving them an opportunity to comment. It was observed that the Appellants had not formally sought to amend their Notices of Appeal in the FTT to include the specific arguments upon which the Revenue were unsuccessful (including a reference to specific case law). However, in respect of Mr Rogers appeal to the FTT the UT observed that he had sent a reply to the Revenue’s Statement of Case which was permitted in default paper cases pursuant to Rule 26(3) and then sought to amend his reply without permission to do so. The UT stated:
“42. It is, however, the case that Mr Rogers did not have the FTT’s permission to amend his reply. Nevertheless, having received a copy of his email of 28 February 2018, there is no suggestion that HMRC applied to the FTT to submit that the email should be disregarded because it was late. In the circumstances, we have concluded that, by conduct, all parties acknowledged that the contents of that email were before the FTT. There was a degree of informality in that approach that would not have been appropriate in a more complicated case. However, the FTT’s overriding objective in Rule 2 of the FTT Rules enjoins the avoiding of “unnecessary formality” and, in the context of a default paper case involving modest penalties, we would regard that approach as appropriate.”
Importantly the UT went on and stated:
“44. … We acknowledge that Mr Rogers was not professionally represented. However, any litigant, whether professionally represented or not, should expect to make their case clearly. That will not necessarily involve the use of technical or legal language but whatever language is used, it should be sufficient to identify the precise point that is made so that the other party can respond to it as necessary and the FTT can determine it. There is a material difference between an argument that a penalty assessment is invalid and an argument that the original notice triggering the requirement to deliver a return was invalid.
- It follows, therefore, that in determining that any notice under s8 of TMA was not valid, the FTT was deciding the appeals on a basis for which neither taxpayer had argued and against which HMRC had been given no opportunity to respond (or to provide evidence).”
The taxpayers submitted in respect of this ground that the Appellants were, institutionally, aware of the FTT decision that Mr Rogers relied on and accordingly, they should have pre-empted the argument that was raised. The UT gave short shrift to this argument and observed:
“46. The taxpayers argue the FTT’s conduct was not procedurally unfair as HMRC (as an institution) were aware of decisions of the FTT such as Khan Properties calling into question the validity of HMRC notices and assessments that were “issued by computer”. They go as far as arguing that, being aware of such decisions, HMRC had a positive duty, in appeals by litigants in person, to draw them to the attention of the FTT and that, having failed to do so, they could scarcely complain when the FTT identified the point itself. No authority was given for such a broad proposition. Indeed in Barton v Wright Hassall LLP [2018] 1 WLR 1119, the Supreme Court noted that, while a court might make allowances for litigants in person in case management decisions or during hearings, such litigants are not subject to a lower standard of compliance with rules. The Supreme Court’s decision is inconsistent with HMRC having a positive duty to assist litigants in person to make their own case against HMRC decisions.
- Nor do we accept the taxpayers’ submission that, since HMRC were aware of FTT decisions in which it was held that documents issued by HMRC “by computer” were invalid, they must have known that the validity of the s8 issues was a live issue in the appeals of Mr Rogers and Mr Shaw. If correct, that would mean that HMRC have a duty to assume that any point that could conceivably be taken by a litigant in person is actually taken. That proposition is just as broad, and no more supported by authority, than the one we set out at [46] above and we reject it for similar reasons.”
As part of the UT’s consideration of this ground, it went back and revisited its earlier decisions of Barry Edwards -v- HMRC [2019] UKUT 131 (TCC) and Christine Perrin -v- HMRC [2018] UKUT 156 (TCC) (both cases in which Joshua Carey appeared as the sole advocate for the Revenue). In doing so, the UT attempted to reconcile the dicta from Burgess and Brimheath -v- HMRC [2015] UKUT 578 (TCC) (mentioned in the UT hearing but not in the decision) and a subsequent decision of a Senior FTT judge (Judge Mosedale) in Vikas Vasudeva -v- The Commissioners for HM Revenue and Customs [2018] UKFTT 370 (TC) (again referred to in the hearing but not in the judgment). It ultimately found (at 50 – 52 of the judgment) that if the Revenue give some evidence of there being a s8 Notice to File being issued, then it will be matter for the FTT to determine whether that evidence is sufficiently strong to discharge HMRC’s burden of proof and that such an assessment should take account of the extent to which the taxpayer disputes receiving the s8 Notice to File.
Discussion
This represents another significant victory for the Revenue. There has been a long running dispute at First-tier Tribunal level about what the FTT can and cannot consider when faced with a Schedule 55 Appeal and whether a natural person must issue the s8 Notice to File. In light of the outcome of this Appeal, it can no longer be sensibly suggested that an identifiable person must issue the s8 Notice to File. As long as the Revenue have, as they demonstrated in this Appeal, taken a high level decision to decide the self assessment criteria, that is all that is required.
There have also been a significant number of instances where adverse decisions have been made both for and against taxpayers without having provided any opportunity to comment. It is hoped that in light of this decision such a practice will stop.
Coming to the end of this tax season, if a taxpayer receives a penalty they should seek specialist advice to determine whether all of the formal criteria have been met before the Revenue having issued a penalty, or whether they have a reasonable excuse or special circumstance that might permit the penalty to be avoided or reduced.
Joshua Carey is instructed in both direct and indirect tax matters for and against the Revenue. He has developed significant experience in personal tax, avoidance litigation, VAT and excise matters. He is also direct access qualified.
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