Prosser v The Commissioners of Inland Revenue [2003] UKSC SPC00362 (12 March 2003)

INHERITANCE TAX – interest on outstanding tax – whether not due on account of Human Rights points – interest due

THE SPECIAL COMMISSIONERS

	JEAN ANNE PROSSER
(as PERSONAL REPRESENTATIVE
	of Mrs EDITH ELIZA JEMPSON deceased)	Appellant

	- and -

	THE COMMISSIONERS OF INLAND REVENUE	Respondent

		Special Commissioner:	DR JOHN F AVERY JONES CBE

Sitting in public in London on 6 March 2003

The Appellant in person assisted by her husband Mr Richard Prosser

Peter Twiddy, Assistant Director, Capital Taxes Office, for the Respondents

© CROWN COPYRIGHT 2003

DECISION

1.	Mrs Jean Anne Prosser appeals against a Notice of Determination dated 9 December 1998 as personal representative of the estate of Mrs Edith Eliza Jempson who died on 23 February 1995.  That Notice determined the value of the estate at a figure which it is now agreed should be reduced to £290,282 on which the inheritance tax is agreed to be £56,112.80, of which £8000 was then unpaid and has subsequently been paid.  The appeal relates only to the interest on the £8,000, which the Revenue calculated amounted to £1,654.86.  Mrs Prosser appeared in person, assisted by her husband; Mr Twiddy appeared for the Revenue.
2.	The background to the dispute in brief is that the Appellant originally submitted £65,000 as the probate value of the deceased’s property, Clietus Cottage, Palestine, Hampshire.  The District Valuer countered with a valuation of £130,000.  The Appellant obtained another valuation of £85,000 in August 1998.  Ultimately in August 2000 the Appellant succeeded in establishing the value of £85,000 in the Lands Tribunal.  The argument concerned the hope value.  The argument was prolonged by the suggestion of the District Valuer that the Appellant should apply for planning permission to test the hope value, which was criticised by the Adjudicator on the basis that he should have been aware that the Appellant was disputing the legal basis of the valuation and should have been told that the appropriate channel was through the Capital Taxes Office and ultimately to this Tribunal.  As a result the Revenue waived the interest during the process of applying for planning permission, which was 1 October 1996 to 17 July 1998.  The Adjudicator said “I consider this offer to be reasonable and a fair way of dealing with the course of events during this time.”  I should add that the Adjudicator found no evidence of negligence by the District Valuer or of maladministration by either the Capital Taxes Office or the Valuation Agency.  I understand that a complaint to the Parliamentary Commissioner for Administration (the Ombudsman) was subsequently rejected.
3.	Mrs Prosser raised arguments against the charge to interest based on the Taxpayer’s Charter, Extra-statutory Concession A98, and articles 6 (right to a fair trial), 8 right to respect for private and family life), 13 (right to an effective remedy before a national authority) of the Human Rights Convention and article 1 of Protocol 1 (right to protection of property) to that Convention.  I said that I was unable to consider the Taxpayer’s Charter or Extra-statutory Concessions because my task was to determine the interest legally due, but my understanding is that the Taxpayer’s Charter already been considered both by the Adjudicator and the Ombudsman.
4.	Mr Twiddy contended that interest was automatic in accordance with section 233 (1)(b) of the Inheritance Tax Act 1984:
(1)	If—…
(b) an amount of tax charged on the value transferred by any other [the previous paragraph deals with the position otherwise than on death] chargeable transfer remains unpaid after the end of the period of six months beginning with the end of the month in which the chargeable transfer was made…
then, subject to subsection (1A) below [not applicable] it shall carry interest from the end of that period at the rate applicable under section 178 of the Finance Act 1989.
5.	On the Human Rights points, Mr Twiddy contended that article 6 did not apply to direct taxes in the light of the decision of the European Court of Human Rights in Ferrazzini v Italy [2001] STC 1314, but that in any event the Appellant had hearings before an independent and impartial tribunal both in the Lands Tribunal and this Tribunal and she had also exercised other rights to have the case considered by the Adjudicator and the Ombudsman; that article 8 had not been breached, although he understood the stress caused to the Appellant by the prolonged dispute; that I could not consider article 13 as it had not been legislated in the Human Rights Act 1998; and that in relation to Protocol 1 article 1 the case was covered by the second paragraph:
“The proceeding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”
The interest charge followed from securing the payment of taxes.
6.	My task is to determine the interest legally payable in accordance with section 233 of the Inheritance Tax Act 1984.  I have considered the Human Rights points raised by the Appellant and agree with all of Mr Twiddy’s contentions on them.  In particular, I agree that article 6 does not apply to the ordinary process of tax collection and so the question of whether the hearing was within a reasonable time does not arise; I agree that there is no breach of article 8; I cannot consider article 13; and that charging interest on outstanding tax is within the exception to Protocol 1 article 1 as securing the payment of taxes. I can therefore see no argument why interest, which is merely commercial restitution to the general body of taxpayers for being deprived of the money that the Appellant always agreed was owed, is not due.  I asked Mrs Prosser why, bearing in mind that she had put forward a value of £85,000 in August 1998 in place of the probate value of £65,000 and ultimately succeeded in the £85,000 value in August 2000, no payment of the tax based on the higher value was made until after it was finally determined to be correct.  She replied that she had never been advised to pay and wanted to agree the figure first.  Since interest was under discussion in September 1998 when the Revenue agreed to waive interest for the period while planning permission was being applied for, it does strike me as odd that she never considered stopping interest running by making a payment on account of the amount she always contended she was liable to pay.
7.	I found an error in the calculation of the interest as a result of which Mr Twiddy agreed that it should be reduced to £1,254.86.  I therefore determine the figures in the Notice of Determination in the agreed figures set out in paragraph 1 above and the interest due in the sum of £1,254.86, and otherwise dismiss the appeal.

J F AVERY JONES
SPECIAL COMMISSIONER

SC 3009/99

Authorities referred to in skeletons and not referred to in the decision:
Dyer v Watson [2002] 4 All ER 1