[2011] UKFTT 33 (TC)

TC00910

Appeal number: TC/2010/07908

Income tax – closure notice – application to appeal out of time – refused on basis of insufficient action by taxpayer and advisers following issue of closure notice

FIRST-TIER TRIBUNAL

TAX 

	NASIR BASHIR	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		TRIBUNAL: 	JOHN CLARK (TRIBUNAL JUDGE)							ROGER WHITE FCA

Sitting in public at 68 Lombard Street, London EC3V 9LJ on 13 December 2010

Muhammad Asif and Jotinder Kaur of Rehncy Saheen, Accountants for the Appellant

David Lewis, officer of HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.	On behalf of the Appellant, Mr Bashir, his accountants submitted a letter dated 27 July 2010 which the Respondents (“HMRC”) treated as an application for a late appeal against the issue of a closure notice dated 3 March 2009. HMRC did not accept this application. This appeal therefore concerns both such refusal of the application and the issue of the closure notice.
2.	In the light of the facts as set out below, we decided that permission for the late appeal should not be granted.
The facts
3.	From the documentary evidence contained in the hearing bundle, together with certain additional correspondence and other information supplied at the hearing, we find the following facts. (We should point out both that the correspondence provided to us consisted only of extracts from what appeared to have been a more substantial set of correspondence, and that Mr Bashir did not attend the hearing and did not provide any form of statement.)
4.	HMRC had given Mr Bashir notice, in a letter to him dated 28 February 2006, that an enquiry was to be made into his tax return for the year to 5 April 2004. He was requested to provide certain information by 10 April 2006, which was never received. Over the period from 4 July 2006 to 9 December 2009 HMRC issued a number of notices to him requesting information and also penalty warning letters.
5.	On 12 February 2009, Mrs Burman, the officer who had been dealing with the enquiry for most of the period since its inception, wrote to Mr Bashir’s accountants and sent a copy of that letter to Mr Bashir. She gave notice that if she had not received a full response to her notice under  s 19A of the Taxes Management Act 1970 (“TMA 1970”) by Monday 2 March 2009, she intended to issue a 2004 closure notice reflecting a £30,000 addition to Mr Bashir’s profits for that year.
6.	On 3 March 2009 Mrs Burman issued a closure notice to Mr Bashir, and indicated that a copy of the letter was being sent to his accountants. Following receipt of the copy, Ms Kaur telephoned Mrs Burman on 5 March 2009. At the hearing reference was made to the accountants’ copy of the closure notice having been date stamped as received on 20 March 2009. As Ms Kaur telephoned Mrs Burman on 5 March 2009 in response to the closure notice, we do not accept this date stamp as an indication of the date on which the closure notice was first received by Mr Bashir’s accountants.
7.	Mrs Burman and Ms Kaur each took their own note of the conversation. Ms Kaur explained that she had been chasing the client, Mr Bashir, for the information, but that the person who had made a loan to Mr Bashir was afraid to give him the supporting evidence he needed because he (the lender) was worried that he would be in trouble. Ms Kaur wondered whether Mrs Burman would write to the lender direct. Mrs Burman explained that she would need authorisation from Mr Bashir to do this.
8.	Ms Kaur indicated that she would try to get such authorisation when Mr Bashir came into the office that afternoon. She pointed out that Mr Bashir was shortly due to leave the country on holiday. Mrs Burman said that if she did not hear from Ms Kaur “within the time specified”, she would “proceed as in the letter”.
9.	In Ms Kaur’s note, she mentioned that the lender’s apparent reason for not providing the information was that he seemed to think that Mr Bashir had an ulterior motive for asking for his bank details and was not providing them. Ms Kaur told Mrs Burman that Mr Bashir was expected at around 4 pm that day and that she would explain and ask him to write the letter of authority. She would have the letter in the post by the end of that day.
10.	We find that the “time specified” as mentioned in Mrs Burman’s note was within the expected period for a letter posted in Harrow, where the accountants’ offices were situated, to reach Mrs Burman’s office, which was also in Harrow. We further find that this period would have been no longer than a few days; a letter posted on 5 March 2009, which was a Thursday, should definitely have arrived at Mrs Burman’s office by the Monday or Tuesday of the following week.
11.	A copy of a letter dated 5 March 2009 authorising Mrs Burman to request the information relating to “£30,000 from Mr Aswat Ali” was included in the bundle. The signature is not legible, but we take it to be that of Mr Bashir. There was no evidence of this letter having been sent to Mrs Burman on 5 March 2009. Within the copy correspondence contained in the bundle there was a file copy of a letter dated 15 April 2009 written by the accountants. This referred to Mrs Burman’s letter dated 12 February 2009, and to her “intention to issue a notice of disclosure [sic]”. It did not refer to Mrs Burman’s letter dated 3 March 2009 enclosing the closure notice.
12.	In their letter dated 23 August 2010 carrying the reference “LMV”, which (the bundle copy being incomplete) we take from the reference at the beginning to have been written by LM Vasa, the officer who had opened the enquiry, HMRC confirmed that they had not received the accountants’ letter dated 15 April 2009. The officer referred to the fact that Mrs Burman had already issued a closure notice and HMRC amendment to Mr Bashir and copied this to the accountants on 3 March 2009, which was prior to the date of the accountants’ letter.
13.	The officer commented that even if HMRC had received the 15 April letter, this would have been outside the 30 day appeal period for the closure notice and amendment and would have been treated as an application for a late appeal. It was surprising to hear that the accountants waited for HMRC’s response to the letter dated 15 April 2009 for more than 15 months without contacting HMRC. The accountants’ letter dated 27 July 2010 was being treated as an application for a late appeal. This was refused on the grounds that no reasonable excuse had been provided for the delay, and that there had been constant delays during the time when the enquiry was being conducted.
14.	We are satisfied on the evidence provided to us that the letter dated 15 April 2009 did not reach HMRC. In addition, we find it odd that this letter made no reference to the closure notice, and instead referred to Mrs Burman’s earlier letter dated 12 February 2009 indicating her intention, in the absence of a full response to the s 19A notice, to issue a closure notice. We find that the letter of 15 April 2009 made no reference to appealing against the closure notice.
Our conclusions on the application for leave to appeal out of time
15.	As Mr Lewis indicated, late notice of appeal is subject to s 49 TMA 1970. (The current version was substituted by paragraph 29 of Schedule 1 to the Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009, SI 2009/56.) If the conditions set out in s 49(4)-(6) are met, HMRC are required under s 49(3) to agree to notice being given after the relevant time limit. In addition, we consider that s 49(2)(a) gives HMRC a wider discretion to agree if they so choose, ie whether or not the three conditions are met. If HMRC choose not to exercise that discretion, the only course available to the taxpayer is to apply to the tribunal for permission.
16.	The tribunal has a similar discretion, and is not subject to the requirement in s 49(3) to give permission if the three conditions are met. However, we accept Mr Lewis’ argument that the tribunal must have regard to the statutory framework relating to time limits. He referred to Advocate General for Scotland v General Commissioners for Aberdeen City (2005) 77 TC 391, [21]-[24], a case concerning the previous form of s 49 TMA 1970, and in particular to the comments at [23] relating to the need for finality in litigation. He also referred to Marijus Leliunga v Revenue and Customs Commissioners [2010] UKFTT 229 (TC) (TC00530) at paragraphs 14 to 18 inclusive. We accept that the Tribunal’s conclusions in that case apply to the present case.
17.	In paragraph 14 of Leliunga the Tribunal referred to the requirement to seek to give effect to the overriding objective set out in Rule 2 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273 L. 1).
18.	We apply these principles in arriving at our decision on Mr Bashir’s application.
19.	The enquiry had continued for a period of almost three years at the point when Mrs Burman gave notice of her intention to issue a closure notice if a full response to the s 19A notice had not been received by 2 March 2009. Further, despite Ms [K?’s] indication that a letter was to be sent on 5 March following Mr Bashir’s visit to the accountants’ offices that day, there was a substantial delay before any further steps were taken. We have our doubts whether the letter of 15 April 2009 was ever sent, as it appears to us more likely to have been some form of draft response to the earlier correspondence rather than to the closure notice.
20.	We have already mentioned our finding that the closure notice reached the accountants on 5 March 2009. Whether the copy date stamped 20 March 2009 was Mr Bashir’s copy, provided to his accountants on that date, is not clear. However, it was clear from the conversation with Mrs Burman that more urgent action was required in order to avoid the closure notice taking effect in the normal way. The lack of such action is a material consideration for us in arriving at our decision whether to permit the appeal to be made out of time.
21.	Whether or not the letter dated 15 April 2009 was sent, we cannot understand why there was no “follow-up” by Mr Bashir or by his accountants until their letter dated 27 July 2010. It was pointed out at the hearing that this letter was sent as a result of distraint proceedings having been initiated by HMRC, but that this was on 23 June 2010, so that the letter was sent four weeks later. We would have expected the accountants to review their file at some earlier stage, if only to assess how much their outstanding charges against Mr Bashir amounted to, even if they were not proposing to render a bill until a later stage.
22.	In the light of the substantial delay between the issue of the closure notice and the letter dated 27 July 2010, as well as the lack of co-operation on the part of Mr Bashir and his advisers over the period of the enquiry and the difficulties which would arise in collecting together at this stage the full evidence for the purposes of a substantive hearing of the appeal against the closure notice, our decision is that permission to appeal out of time should not be granted. This confirms our decision as we gave it orally at the hearing, which Mr Bashir’s accountants requested to be recorded in a full decision.
23.	This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

JOHN CLARK

TRIBUNAL JUDGE
RELEASE DATE: 04 JANUARY 2011