DECISION
Background
1.
These two appeals arise out of the same facts and were listed to be
heard together. The appellants are brothers and were shareholders and directors
in a company called Phoenix Electronic Services UK Limited (“Phoenix”). Both
appellants contend that HMRC was not entitled to make what is known as a
“discovery assessment” against them in relation to tax year 2007-08. They accept
that their tax returns for that year understated their income resulting in
underpayments of tax of £17,953 and £46,483 respectively. However they say that
the assessments are invalid because the conditions necessary to raise discovery
assessments set out in Section 29 Taxes Management Act 1970 were not
satisfied.
2.
There was no real dispute as to the underlying facts save in respect of
one matter (negligent conduct) which we consider below. No witness evidence was
led before us and our findings of fact are based on the documentary evidence
contained in the bundle prepared by HMRC. We first deal with certain background
findings of fact before considering the statutory framework which permits the
respondents to make discovery assessments. We then consider the parties’
submissions and give our decision on the issue of whether HMRC was entitled to
make the discovery assessments which are under appeal.
Background Findings of
Fact
3.
The Appellants were at all material times directors of Phoenix. The
share capital of Phoenix as at 31 May 2007 comprised 500,000 £1 ordinary
shares. On 31 March 2008 the first appellant sold 25,000 ordinary shares and
the second appellant sold 75,000 ordinary shares. In each case the purchaser
was Phoenix so that the transaction was a purchase by Phoenix of its own shares.
4.
The appellants instructed a firm called Accountants for Small Business Limited
(“ASB”) as their accountants and that firm acted on behalf of the appellants in
making their tax returns. The first appellant’s return was submitted on 1
August 2008 and the second appellant’s return was submitted on 2 August 2008.
In each case the returns included a capital gains tax computation showing
chargeable gains of £14,589 and £62,138 respectively with tax due at 40% on
those amounts.
5.
In 2008-09 Phoenix made further purchases of its own shares which were
again shown on the appellants’ tax returns as giving rise to chargeable gains.
6.
The enquiry window for the 2007-08 returns closed on 31 January 2009.
Thereafter the only basis upon which HMRC could make an assessment in relation
to that tax year was by way of discovery assessment. On 17 September 2010 HMRC
wrote to the appellants and to ASB indicating that it appeared their 2007-08
tax returns were inaccurate. In particular that the proceeds of the share
transactions should have been treated as distributions by Phoenix and subject
to Income Tax rather than Capital Gains Tax. At the same time HMRC opened an
enquiry into the appellants’ 2008-09 tax returns.
7.
In response to this correspondence, ASB immediately accepted on behalf
of the appellants that the transactions ought to have been treated as distributions.
In letters dated 21 October 2010 ASB stated as follows in relation to 2008-09:
“I inadvertently overlooked
certain restrictions that are applicable for such distributions to be treated
as capital rather than income. As a result, Mr Brown accepts that the disposal
of shares bought back by the Company should have been treated as a dividend
distribution. ”
8.
A similar concession was made in relation to 2007-08 but at the same
time ASB contended that HMRC were not entitled to make a discovery assessment.
Correspondence in relation to this issue continued and ultimately led to discovery
assessments being made on 16 May 2011 and to the present appeals. The amount of
the discovery assessments is not in dispute.
The
Law
9.
The power of HMRC to enquire into a self-assessment tax return is in Section
9A Taxes Management Act 1970 (“TMA 1970”). That section sets out
various time limits in which notice of intention to enquire must be given. For
present purposes it is not disputed that the time for an enquiry into the
2007-08 returns expired on 31 January 2009.
10.
In circumstances where the period in which a notice of enquiry can be
given has expired, it may still be possible for HMRC to make an assessment
where a loss of tax is discovered. Section 29 TMA 1970 sets out the
circumstances in which a discovery assessment, can be made. The following
provisions of section 29 are relevant for present purposes:
1) If an officer of the Board or the Board discover,
as regards any person (the taxpayer) and a year of assessment—
(a) that any income which ought to have been assessed
to income tax, or chargeable gains which ought to have been assessed to capital
gains tax, have not been assessed, or
(b) …
(c) …
the officer or, as the case may be, the Board may,
subject to subsections (2) and (3) below, make an assessment in the amount, or
the further amount, which ought in his or their opinion to be charged in order
to make good to the Crown the loss of tax.
(2) …
(3) Where the taxpayer has made and delivered a return
under section 8 or 8A of this Act in respect of the relevant year of
assessment, he shall not be assessed under subsection (1) above—
(a) in respect of the year of assessment mentioned in
that subsection; and
(b) ... in the same capacity as that in which he made
and delivered the return,
unless one of the two conditions mentioned below is
fulfilled.
(4) The first condition is that the situation
mentioned in subsection (1) above is attributable to fraudulent or negligent
conduct on the part of the taxpayer or a person acting on his behalf.
(5) The second condition is that at the time when an
officer of the Board—
(a) ceased to be entitled to give notice of his
intention to enquire into the taxpayer's return under section 8 or 8A of this
Act in respect of the relevant year of assessment; or
(b) informed the taxpayer that he had completed his
enquiries into that return,
the officer could not have been reasonably expected,
on the basis of the information made available to him before that time, to be
aware of the situation mentioned in subsection (1) above.
(6) For the purposes of subsection (5) above,
information is made available to an officer of the Board if—
(a)
it is contained in the taxpayer's return under section 8 or 8A of this Act in
respect of the relevant year of assessment (the return), or in any accounts,
statements or documents accompanying the return;
(b)
it is contained in any claim made as regards the relevant year of assessment by
the taxpayer acting in the same capacity as that in which he made the return,
or in any accounts, statements or documents accompanying any such claim;
(c) it is contained in any documents, accounts or
particulars which, for the purposes of any enquiries into the return or any
such claim by an officer of the Board, are produced or furnished by the
taxpayer to the officer; or
(d) it is information the existence of which, and the
relevance of which as regards the situation mentioned in subsection (1) above –
(i) could reasonably be expected to be inferred by an
officer of the Board from information falling within paragraphs (a) to (c)
above; or
(ii) are notified in writing by the taxpayer to an
officer of the Board.
11.
There is no dispute in these appeals that income which ought to have
been assessed to tax has not been assessed. HMRC must therefore establish that
one of the two conditions in subsections (4) and (5) are satisfied. On these
appeals they contend that both conditions are satisfied.
12.
The first condition is relatively straightforward. HMRC must establish
that the omission of income from the appellants’ tax returns was brought about
as a result of negligent conduct on the part of the appellants or ASB. In this
context, negligent conduct is to be judged by reference to the reasonable
taxpayer. The test was described by Judge Berner in Anderson (deceased)
v Revenue and Customs Commissioners [2009] UKFTT 206 at [22], cited with
approval by the Upper Tribunal in Colin Moore v Revenue and Customs
Commissioners [2011] UKUT 239 (TCC):
“The
test to be applied, in my view, is to consider what a reasonable taxpayer,
exercising reasonable diligence in the completion and submission of the return,
would have done.”
13.
A similar test will apply in relation to an agent. What would a
reasonable agent exercising reasonable diligence in the completion and submission
of the return have done?
14.
The second condition is not so straightforward and has been the subject
of consideration by the Court of Appeal in a number of recent cases. The first
of those cases is Langham v Veltema [2004] STC 544
where Auld LJ described the operation of the second condition in the following
way:
“32. If, as here, the
taxpayer has made an inaccurate self-assessment, but without any fraud or
negligence on his part, it seems to me that it would frustrate the scheme's
aims of simplicity and early finality of assessment to tax, to interpret
section 29(5) so as to introduce an obligation on tax inspectors to conduct an
intermediate and possibly time consuming scrutiny, whether or not in the form
of an enquiry under section 9A, of self-assessment returns when they do not
disclose insufficiency, but only circumstances further investigation of which
might or might not show it…..
33. More particularly,
it is plain from the wording of the statutory test in section 29(5) that it is
concerned, not with what an Inspector could reasonably have been expected to
do, but with what he could have been reasonably expected to be aware of. It
speaks of an Inspector's objective awareness, from the information made
available to him by the taxpayer, of "the situation" mentioned in
section 29(1), namely an actual insufficiency in the assessment, not an
objective awareness that he should do something to check whether there is such
an insufficiency, as suggested by Park J. If he is uneasy about the sufficiency
of the assessment, he can exercise his power of enquiry under section 9A and is
given plenty of time in which to complete it before the discovery provisions of
section 29 take effect.
…
36 The
answer to the second issue– as to the source of the information for the purpose
of section 29(5) - though distinct from, may throw some light on, the answer to
the first issue. It seems to me that the key to the scheme is that the
Inspector is to be shut out from making a discovery assessment under the
section only when the taxpayer or his representatives, in making an honest and
accurate return or in responding to a section 9A enquiry, have clearly alerted
him to the insufficiency of the assessment, not where the Inspector may have
some other information, not normally part of his checks, that may put the
sufficiency of the assessment in question. If that other information when seen
by the Inspector does cause him to question the assessment, he has the option
of making a section 9A enquiry before the discovery provisions of section 29(5)
come into play. That scheme is clearly supported by the express identification
in section 29(6) only of categories of information emanating from the taxpayer…”
15.
The Court of Appeal in HMRC v Lansdowne Partners Limited Partnership [2011] EWCA Civ 1578 considered how much and what information it is necessary to
provide to HMRC in order to avoid the possibility of a discovery assessment.
The Chancellor at [50] formulated the issue in the following terms:
“In these
circumstances the question is whether on this information an officer of the
Board could have been reasonably expected to be aware that the amount of the
profits included in the partnership return was insufficient. Plainly it is
necessary to assume an officer of reasonable knowledge and understanding.”
16.
At first instance in the same case (HMRC v Lansdowne Partners Limited
Partnership [2010] EWHC 2582 (Ch)) Lewison J as he then was helpfully
summarised the law at [46] and [49] as follows:
“46. In
Langham v Veltema [2004] STC 544 the Court of Appeal considered section 29 and
discovery assessments. In my judgment that case establishes the following
propositions:
i)
"Awareness" is the officer's awareness of an actual insufficiency in
the self-assessment in question, rather than an awareness that he should do
something to check whether there is an insufficiency (§ 33);
ii) The
test whether an officer could reasonably have been expected to be aware of an
actual insufficiency is an objective test (§ 33);
iii) The
sources of information referred to in section 29 (6) are the only sources of
information to be taken into account in deciding whether an officer ought
reasonably to have been aware of the actual insufficiency (§§ 36, 51);
iv) The
information in question must clearly alert the officer to the insufficiency of
the assessment (§ 36).
…
49. In Corbally-Stourton Mr Hellier pointed out (correctly in my
judgment) that:
i) The
statutory reference is to "an officer" of the Board, not to any
particular officer;
ii) This
entails a hypothetical officer rather than any real individual;
iii) The
hypothetical officer must be endowed with knowledge of elementary arithmetic,
some knowledge of tax law, and some tax law, all of which he will apply to the
prescribed sources of information.”
17.
In addition to the law relating to discovery assessments it is also
necessary to say something about the principles which govern the taxation of
the disposal proceeds in circumstances where a company purchases its own shares.
18.
In general a distribution made by a company will be chargeable to income
tax in the hands of an individual recipient. Section 209 Income and
Corporation Taxes Act 1988 (“ICTA 1988”) defines the term “distribution”
for these purposes. In particular by section 209(2)(b) it includes:
“… any other distribution
out of the assets of the company (whether in cash or otherwise) in respect of
shares in the company, except so much of the distribution, if any, as
represents repayment of capital on the shares …”
19.
In general, therefore, any sum paid by a company in purchasing its own
shares in excess of the capital contributed in respect of those shares will be
a distribution and subject to income tax. However section 219 operates
to exclude from the meaning of the term distribution a payment made by a
company in purchasing its own shares where the company is an unquoted trading
company (such as Phoenix) and certain conditions are satisfied. For present
purposes a payment is excluded by section 219(1)(a) where:
“[the purchase] is made
wholly or mainly for the purpose of benefiting a trade carried on by the
company … and does not form part of a scheme or arrangement the main purpose of
which or one of the main purposes of which is –
(i) to enable the owner
of the shares to participate in the profits of the company without receiving a
dividend, or
(ii) the avoidance of
tax …”
20.
Section 225 makes provision for a company to make a written
application to HMRC for advance clearance confirming whether or not section 219
will apply to an intended transaction.
21.
Section 226(1) ICTA 1988 provides that if a company purchases its
own shares and treats the transaction as one to which section 219
applies (ie not a distribution) then it must make a return of the transaction
to the inspector within 60 days of the payment giving particulars of the
payment and the circumstances by reason of which it is treated as falling
within section 219.
22.
Finally in this context it is relevant to note that HMRC have issued a
statement of practice (SP2/82) indicating how the test in section 219(1)(a) is
applied, in particular the circumstances in which the purchase will be treated
as wholly or mainly benefiting a trade carried on by the company. It also
outlines the information required in applying for a clearance under section
225.
Submissions
23.
The issue which we have to decide is whether, on the facts as we find
them, one or other of the two conditions set out in s29(4), (5) are
satisfied so as to entitle HMRC to make discovery assessments. The onus is on
HMRC to establish that the conditions are satisfied.
24.
The primary submission made by Miss Bartup was that on 31 January 2010
an officer could not have been reasonably expected on the basis of information
available to him to be aware that there was an understatement of income. She
also relied upon a submission that the understatement of income was
attributable to negligent conduct on the part of ASB although that was very
much a secondary argument and she did not make detailed submissions on the
point.
25.
Miss Bartup submitted that an officer could only have been expected to
be aware of the understatement if he had known:
(1)
That the shares disposed of by the appellants had been purchased by Phoenix.
(2)
That the conditions allowing capital gains tax treatment set out in section
219 were not satisfied.
26.
In the words of Auld LJ quoted above, Miss Bartup submitted that the
appellants had not clearly alerted the inspector to the insufficiency of the
assessment. She also relied on a decision of the First-tier Tribunal in Abdul
Omar v HMRC [2011] UKFTT 722 (TC) although with respect that decision
appears to be on its own facts and does not take matters further than the law
we have outlined above.
27.
Mr Hall for the appellants helpfully provided his submissions in writing.
We carefully read those submissions during the course of the hearing and
subsequently. We can summarise them for present purposes as follows:
(1)
That a reasonable officer would have inferred that the appellants were
selling their shares to Phoenix, and
(2)
That a reasonable officer would have inferred that the share sale was
not wholly or mainly for the purpose of benefiting a trade carried on by the
company.
28.
In each case Mr Hall submits that those inferences could be drawn from
material available in the tax returns together with other material easily
available to a reasonable HMRC officer. The other material was available to
HMRC without making third party enquiries and was not restricted by section
29(6). If necessary, Mr Hall submitted that the inferences could be drawn
only from material available in the tax return.
29.
We deal with the parties’ more detailed submissions in our decision
below.
Decision
30.
Firstly Mr Hall invites us to find that a reasonable officer would have
inferred that the appellants were selling their shares to Phoenix.
31.
The basis on which Mr Hall invites that inference is that the
appellants’ tax returns show that they were directors of and employed by Phoenix. The returns show each appellant had a small salary from Phoenix of £5,016. They
also show larger dividends of £55,555 for each appellant and although the
paying company is not identified the return shows that they owned a large
number of shares in Phoenix. The shares in Phoenix were also sold for a large
consideration of £100,000 in the case of the first appellant and £300,000 in
the case of the second appellant. Phoenix was a close company and the
appellants had only one employment. Of the tax declared as payable on the
return of the second appellant 15.81% related to employment and dividend income
and 84.19% related to the capital gain declared.
32.
We accept and find the facts stated in the previous paragraph but we do
not accept the inference which we are invited to draw from those facts. The
facts say nothing about the identity of the purchaser of the shares. The
purchaser could just as easily have been another family member or business
associate. The leap Mr Hall invites us to make is too great. Indeed in our view
if an inspector had assumed the purchaser was Phoenix then it would have been
an unjustifiable assumption.
33.
In support of his submission that we are entitled to take into account
information above and beyond section 29(6) TMA 1970, Mr Hall referred us
to a decision of the First-tier Tribunal in Charlton & Others v HMRC
[2011] UKFTT 467 (TC). That was a case on very different facts to the present
and was concerned with a tax avoidance scheme. As a matter of fact the FTT held
that based on what was in the return it should have been obvious to a
reasonably competent tax inspector that a tax avoidance scheme had been
implemented. If that inspector had sought guidance from colleagues he would
soon have realised that immediate assessments should have been made (See paras
[122] and [128] – [134]). At [122] the FTT said:
“We consider that the ban
on raising further enquiries about the facts, implicit in the Court of Appeal’s
decision in Veltema, and indeed in sub-section 29(6), has no bearing on
how we should expect the notional officer to approach his proper task of then
considering the information and deciding whether or not he should raise
assessments. And if it is glaringly obvious either that the relevant officer
should consider the law, and possibly refer to published material or, where an
SRN number is disclosed, simply send an e-mail or make a phone call to
colleagues and ask for guidance, this is precisely how we should treat the
notional officer as proceeding.”
34.
Decisions of the FTT are not binding upon us, and we note that the
decision in Charlton is the subject of an appeal to the Upper Tribunal.
In any event it does not assist us on the facts of the present case. In Charlton
the FTT was not suggesting that the officer should be taken to know the results
of further enquiries in relation to the underlying facts. Rather it was
suggesting he should be taken to know the results of enquiries as to how the
law applied to facts derived from the material identified in section 29(6).
Even if the decision in Charlton is correct it does not assist the appellants
in the present appeals.
35.
Mr Hall suggests that the officer would be expected to consult the inspector
who dealt with Phoenix’s corporation tax returns. However that is an enquiry
involving a fact finding exercise and is outside the scope of what the FTT in Charlton
was suggesting. It is also inconsistent with the principles outlined by the
Court of Appeal in Langham v Veltema. Whatever was on Phoenix’s
corporation tax file is not information available to the officer as defined by section
29(6).
36.
Mr Hall invites us to consider other information which he says would be
available to the officer, such as that contained in the company accounts for
the year ended 31 May 2008. For the reasons given above, such information is
not to be taken into account for the purposes of section 29(5).
37.
In support of his submission that we can take into account other
information outside that specified in section 29(6) Mr Hall referred to Langham
v Veltema where he says on the facts of that case it was permissible to
treat the contents of a P11D as being available to the reasonable inspector. However
that is the basis upon which Park J dismissed the appeal of HMRC at first
instance and it was clearly overruled by the Court of Appeal in allowing the
further appeal of HMRC. Auld LJ set out his interpretation of section 29(5),
(6) clearly at paragraphs [33] and [36]. He goes on to observe at [37] and
[38] that P11D information was irrelevant given his construction but even on
the construction adopted by Park J it added little if anything to the section
29(6) information. Chadwick LJ and Arden LJ agreed with the analysis of Auld
LJ although neither specifically refers to the P11D.
38.
It is true that Chadwick LJ suggests at [48] that the reasonable
inspector must be treated as having additional information which he might
reasonably have called for. Mr Hall did not refer us to this paragraph, however
it is inconsistent with the judgment of Auld LJ cited above and Arden LJ
expressly disagrees at [51] of her judgment. To this extent therefore Chadwick
LJ was in a minority and this part of his judgment does not represent good law.
39.
In the circumstances we find that there is no reasonable inference that
the shares had been sold to Phoenix.
40.
Secondly, and even if there was a reasonable inference that the shares
had been sold to Phoenix, we accept Miss Bartup’s submission that the officer
would not know whether the facts were such that section 219 ICTA 1988
applied to exclude the payment from the definition of ‘distribution’. In
particular whether the payment was made wholly or mainly for the purpose of
benefiting a trade carried on by the company. In this regard Mr Hall relied on
paragraph 3 of SP 2/82 which states as follows:
“If the company is not
buying all the shares owned by the vendor, or if although the vendor is selling
all his shares he is retaining some other connection with the company - for
example, a directorship or an appointment as consultant - it would seem
unlikely that the transaction could benefit the company's trade, so the trade
benefit test will probably not be satisfied…”
41.
Mr Hall submitted that it was unlikely the trade benefit test could be
satisfied. However the fact that something is likely or unlikely is not the
test to be applied in the context of section 29(5) TMA 1970. The
question is whether the officer would be aware of an actual insufficiency such
that he would make an assessment without the need for further enquiries. Moses
LJ in HMRC v Lansdowne Partners Limited Partnership [2011] EWCA Civ 1578
at [70] stated as follows:
“The
statutory condition turns on the situation of which the officer could
reasonably have been expected to be aware. Awareness is a matter of perception
and of understanding, not of conclusion. I wish, therefore, to express doubt as
to the approach of the Special Commissioner in Corbally-Stourton v Revenue and
Customs Comrs [2008] STC (SCD) 907 and of the Outer House in R(on the
application of Patullo) v Revenue and Customs Commissioners [2010] STC 107, namely, that to be aware of a situation is the same as concluding that
it is more probable than not. The statutory context of the condition is the grant
of a power to raise an assessment. In that context, the question is whether the
taxpayer has provided sufficient information to an officer, with such
understanding as he might reasonably be expected to have, to justify the
exercise of the power to raise the assessment to make good the insufficiency.”
42.
It is not therefore sufficient for the officer to think it likely that
there is an insufficiency. In the present circumstances he would want to make
further enquiries to establish the facts. Indeed paragraph 3 of SP 2/82
continues:
“… However, there are
exceptions; for example, where a company does not currently have the resources
to buy out its retiring controlling shareholder completely but purchases as
many of his shares as it can afford with the intention of buying the remainder
where possible. In these circumstances, it may still be possible for the
company to show that the main purpose is to benefit its trade.”
43.
In our view even if the officer knew that the shares had been purchased
by Phoenix he would not have made an assessment based on the information in the
2007-08 tax return. He would still have needed to make enquiries as to whether
the trade benefit test was satisfied, for example identifying whether the
appellants had remained directors of Phoenix after the sale and if so why.
There was no evidence from which he could reasonably have inferred that the
directorships continued or ceased at or about the time of the share sale. If
they continued the officer would still need to know the circumstances in which
they continued to see if the test in section 219(1)(a) ICTA 1970 was
satisfied.
44.
Mr Hall further submitted that the officer would have known that the
trade benefit test was not satisfied because the company had not made a return
of the payment pursuant to section 226(1) ICTA 1988. The return is to be
made by the company to its inspector. We accept and find as a fact that no such
return was made. Again, however for the reasons given above this is not information
which falls to be taken into account for the purposes of section 29(5). In
any event, it could not be assumed that the company was aware of its obligation
to make such a return, especially when the directors had treated the disposal
proceeds as being subject to capital gains tax. At best there was an
inconsistent treatment which would require further enquiry and explanation.
45.
In response to Miss Bartup’s submission that the appellants had not
clearly alerted the inspector to the insufficiency of the assessment, Mr Hall
submitted that this was not relevant on the facts of the present case. He
suggested that the obligation on a taxpayer to clearly alert HMRC to an
insufficiency in a self assessment only arises where figures included in the
return are open to interpretation or uncertain. We do not accept Mr Hall’s
submission. Whatever the cause of the insufficiency if the information identified
in section 29(6), including any disclosure in the return itself, is not
sufficient for the reasonable inspector to know that there was an insufficiency
then HMRC can make a discovery assessment.
46.
Mr Hall submitted that HMRC made just the inferences he invites when
they first commenced the enquiry into the 2008-09 return on 17 September 2010.
In a letter of the same date the officer indicated that it appeared the 2007-08
return was inaccurate. In particular the officer identified that the shares had
been sold to Phoenix and that the circumstances were such that the proceeds
over and above the original cost of the shares represented a distribution.
However our reading of this correspondence is that it was part of the
fact-finding involved in an enquiry. In particular the letter asserts that the
shares were sold to Phoenix and that the proceeds represented an income
distribution. It then states:
“Please let me have your
agreement to this or any representations that you might wish to make.”
47.
It is clear to us and we find as a fact that as at 17 September 2010 the
officer who opened the enquiry did not have sufficient information to make an
assessment. He was aware that Phoenix had purchased the shares but he could not
have known with sufficient certainty whether the payment was made wholly or
mainly for the purpose of benefiting the trade of the company. In addition we
find as a fact that at the time the enquiry was opened the inspector who opened
the enquiry had a copy of the Form 169 submitted to Companies House which
showed that the company had purchased the shares. It is also likely and we find
as a fact that he had obtained and considered the annual accounts of Phoenix and the information contained therein. None of that is information available to the
officer as defined by section 29(6).
48.
In the circumstances we find that there is no reasonable inference from
the information available that the sale was not wholly or mainly for the
purposes of benefiting a trade carried on by Phoenix.
Conclusion
49.
For the reasons given above we are satisfied that HMRC were entitled to
make discovery assessments against both appellants. There is no issue as to the
quantum of those assessments and in the circumstances we confirm them. The
appeals are therefore dismissed.
50.
We did not hear detailed submissions in relation to whether ASB were
negligent in failing to treat the disposal proceeds from the sale of shares in Phoenix as distributions. The letter from ASB in which it says it “inadvertently”
overlooked the restrictions does point towards that conclusion. However we have
not heard evidence from ASB in relation to this aspect of the appeals. Whilst
the point was taken in HMRC’s Statement of Case the correspondence leading to
the appeals did not contain any discussion of whether there was negligent
conduct. In those circumstances we do not consider it appropriate to make any
finding of fact in that regard. Because of our findings in relation to the
second condition in section 29(5) TMA 1970 it is not necessary for us to
do so.
51.
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.
JONATHAN CANNAN
TRIBUNAL JUDGE
RELEASE DATE: 28 June 2012
