SPC00498

ASSESSMENTS – appeal dismissed and estimated assessments upheld in the taxpayer’s absence 
PRACTICE – taxpayer disappeared – Direction dispensing with service of documents on the Appellant

THE SPECIAL COMMISSIONERS

	PETER MARTIN SMITH	Appellant

	- and -

	HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

			Special Commissioner:	DR JOHN F AVERY JONES CBE

Sitting in public in London on 24 August 2005

The Appellant did not appear and was not represented

Barry Williams, HM Revenue and Customs Appeals Unit London, for the Respondents

© CROWN COPYRIGHT 2005

DECISION

1.	This is an appeal by Mr Peter Martin Smith against assessments for 1992-93 to 1998-99 (the first three being made outside normal time limits).  The Appellant did not appear and was not represented; the Respondent was represented by Mr Barry Williams.
2.	The reason the Appellant did not appear is that he is understood to have left the country and his whereabouts cannot be traced.  Mr Williams had previously applied for an order for substituted service under Regulation 28 of the Special Commissioners (Jurisdiction and Procedure) Regulations 1994.  After hearing about the detailed enquiries that had been made and in the absence of any possible method of substituted service I directed that the requirement for documents relating to the appeal to be served on the Appellant be dispensed with.  However, the bundle of documents and the Revenue’s statement of case had previously been served on his accountants, Pannell Kerr Forster (“PKF”) at a time when they were still acting for him.  Under Regulation 19 if the Revenue do trace the Appellant it will be open to him to apply to set aside this decision on the ground that he had good and sufficient reason for failing to appear or be represented.  Mr Williams confirmed that if the Appellant did, he would not argue that he was out of time.
3.	I heard evidence from the Inspector dealing with the case, Mr Philip Worsley, who provided a detailed witness statement running to 13 pages with 32 exhibits (although some of these relate to Paul Steiger Limited (“the Company”) of which the Appellant was director and shareholder).
4.	I find the following facts:
(1)	In the year ended 31 December 1992 the Company, which made curtains, received a qualified audit report because of unexplained stock losses of approximately £82,000.
(2)	Mr Worsley believes that the Appellant sold off-cuts and new rolls of fabric belonging to the Company for his own account.  PKF investigated the Appellant’s and his wife’s private bank accounts for the years ended 5 April 1992 to 1996 and were left with unexplained deposits which they were to discuss with the Appellant.  Mr Worsley used this information for making the assessments for those years.  For the years ended 31 December 1996 to 1998 Mr Worsley made his own analysis of the bank accounts.  
(3)	Mr Worsley made assessments under Schedule D Case I based on the unexplained deposits, which are in all cases less than the amount of unexplained deposits.  In particular, in the year to 5 April 1993 when the unexplained deposits were £141,728 he assessed £30,000 on the basis that he accepted that the reduction in the Appellant’s insurance cover represented sales of jewellery and other items.  In addition, in cases where the deposits could not be specifically identified with known sales a balance of £30,000 was deducted from the total unexplained deposits.  In the year 1997-98 he intended to assess £50,000 but because of an error only £30,000 was assessed, which he does not ask me to increase.
(4)	Mr Worsley also made Schedule E assessments for the years 1995-96 to 1998-99 for benefits.  The figure for the year to 31 December 1998 was based on Mr Worsley’s analysis of the Company’s American Express card items that appeared to be personal expenditure totalling £54,241, which had not been debited to the Appellant’s loan account or accounted for on form P11D.  PKF did not reply to correspondence about this expenditure.  Mr Worsley assessed a reduced amount for £47,500 for 1998-99 and he used this figure to estimate the assessments for the three earlier years at £37,500, £40,000 and £45,000 in the absence of any card figures for earlier years, which were not provided in response to a s 20 TMA 1970 Notice that Mr Worsley had obtained.
5.	Mr Williams contends:
(1)	that the facts show that the Appellant has been at least negligent so as to enable the Revenue to make the assessments for the first three years outside normal time limits under s 36 TMA 1970;
(2)	that the Appellant has not displaced the assessments for any of the years;
(3)	that I should infer that there was a continuing course of conduct for personal expenditure to be charged to the Company card in the earlier years that had been assessed.
6.	I bear in mind that I have not heard from the Appellant but the burden of proving neglect for the earlier years is on the Revenue.  If this is shown, in relation to all years the burden is on the Appellant to disprove the assessment.  Not having heard from the Appellant there are no explanations that I can take into account.  I have, however, been through Mr Worsley’s witness statement and relevant exhibits carefully and I consider that he has done a thorough job, which on many occasions gives the Appellant the benefit of any doubt.  
7.	I find that that Mr Worsley’s evidence amply demonstrates that the Appellant has been at least negligent.  
8.	I infer that in relation to the benefits on the Company card there was a continuing course of conduct by the Appellant that enables the assessments to be made for the three years before the year for which the Company card was analysed.  
9.	Accordingly I dismiss the appeal and confirm the assessments in the following figures (including the tax for self-assessment years):
	1992-93
£	1993-94
£	1994-95
£	1995-96
£	1996-97
£	1997-98
£	1998-99
£	
Case I	30000	50000	50000	50000	50000	30000	150000	
Sch E				37500	40000	45000	47500	
Tax (incl Class 4 NIC)				57953.32	37419.60	30212.98	80074.60	

JOHN F. AVERY JONES

SPECIAL COMMISSIONER
RELEASE DATE: 30 August 2005

SC 3067/04

Authorities referred to in skeletons and not referred to in the decision:
Jonas v Bamford 51 TC 1
Nicholson v Morris 51 TC 95
Hurley v Taylor 71 TC 268