Spc00623

Income tax – self assessment – closure notice under s 28A TMA 1970 – whether evidence to displace conclusions – no appearance by Appellant – representatives resigned – absence of any such evidence – appeal dismissed

THE SPECIAL COMMISSIONERS

JOHN BRYANT	Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS	Respondents

Special Commissioner: 	JOHN CLARK

Sitting in public in London on 11 July 2007

The Appellant did not appear and was not represented

Nicola Parslow of HM Revenue and Customs’ Appeals Unit, London and Anglia, for the Respondents

© CROWN COPYRIGHT 2007

DECISION

1.	This is an appeal against a closure notice under section 28A of the Taxes Management Act 1970 in respect of Mr Bryant’s self-assessment return for 2003-04; other assessments for earlier years have since been vacated. The notice of appeal given by Mr Bryant’s then advisers RA & Co specified that the appeal should be heard by a Special Commissioner, and indicated without any detailed explanation that “Our client disagrees with your basis of assessment”.
2.	Although RA & Co gave notice of appeal on behalf of Mr Bryant, having provided information to the Respondents (“the Revenue”) in the course of the enquiry into Mr Bryant’s 2004 Return, Mr Bryant did not respond to them, nor was there any contact between him and the Revenue. On 10 July 2006, RA & Co wrote to him resigning from their appointment to act as accountants and tax advisers to him and to his company BMS Plumbing Services Limited.
3.	Mr Bryant was notified of the date of hearing for this appeal, but did not respond, nor did he attend the hearing. As a result, Mrs Parslow on behalf of the Revenue applied for the hearing to proceed in his absence under Rule 16 of the Special Commissioners (Jurisdiction and Procedure) Regulations 1994. As there had been no contact from Mr Bryant and no representations had been made on his behalf, I granted Mrs Parslow’s application.
The facts
4.	The evidence consisted of a bundle of documents and a witness statement given by Mrs Ann Jackson, a Higher Compliance Officer for the Revenue’s “Small Business Stream” for London and Anglia. Mrs Jackson also gave oral evidence.
5.	On 26 May 2005 Mrs Jackson gave Mr Bryant notice of enquiry into his tax return for the year to 5 April 2004. On the same date she requested RA & Co to provide various documents and various items of information. This request was followed by a formal notice dated 29 July 2005 under section 19A of the Taxes Management Act 1970 to Mr Bryant, and copied to RA & Co.
6.	On 28 July 2005 RA & Co responded to Mrs Jackson’s requests for documents and information. They explained that due to Mr Bryant’s ill health they had been unable to obtain any further information from him; instead, they provided Mrs Jackson with all the information they held on Mr Bryant.
7.	On 15 August 2005 Mrs Jackson wrote to RA & Co acknowledging the documents and information provided by them. She specified the items remaining outstanding following the section 19A notice, and requested their production before 31 August 2005.
8.	Mrs Jackson reviewed the available information, including that from the Revenue’s systems. This showed that the total of the CIS (Construction Industry Scheme) vouchers processed against Mr Bryant’s record in respect of his sole trade for 2003-04 was £52,750. Mr Bryant was in receipt of income, other than through the CIS, of £29,979.34. This gave a total turnover of £82,724.34, as opposed to the £45,230 shown in the return. Mrs Jackson concluded that the turnover had been understated by £37,494.
9.	Mrs Jackson also concluded that the expenses were incorrect. In computing revised figures she allowed materials in accordance with the CIS vouchers (£24,789.00) plus the materials receipted. (In respect of expenditure claimed without supporting receipts, she decided in the interests of reaching a settlement of the matter to allow half the total of such expenditure). The expenditure totalled £31,543, as opposed to the original amount claimed of £12,235.00. Mrs Jackson made minor adjustments to the motoring costs to reduce the amount claimed from £6,643 to an allowable total of £5,814. The overall effect of all Mrs Jackson’s adjustments was to increase the net profit figure to £39,527.
10.	It appears that RA & Co replied on 23 August 2005 to Mrs Jackson’s letter dated 15 August; no copy of their letter was included in the bundle of documents put in evidence. Mrs Jackson responded on 20 September 2005. She acknowledged Mr Bryant’s ill health, but indicated her serious concerns about the level of profit shown in Mr Bryant’s return. To indicate her findings, she produced a schedule showing that Mr Bryant’s turnover for the year 2003-04 should be at least £82,724. She produced a further schedule showing the difference between the amount of net profit as shown in Mr Bryant’s return and the minimum amount of net profit which she would expect to see on the basis of the revised turnover figure; this net profit was £39,527.
11.	In their reply dated 7 October 2005, RA & Co accepted Mrs Jackson’s figures for the expenses. In relation to her schedule showing turnover, they raised certain queries. The first related to the CIS vouchers. Of the total gross amount of £52,750, they had included two items in the list provided to Mrs Jackson; the amounts of these were £5,305 and £16,735. The balance of £30,710 had been included in the accounts for BMS Plumbing Services Ltd for the period from 8 October 2003 to 31 October 2004. Mr Bryant’s sole trade had ceased on 30 November 2003.
12.	Their second query related to payments from a person named John Dunlop Scalabrine. These totalled £25,841.80 gross. These had not been included within Mrs Jackson’s list of CIS vouchers. RA & Co had been led to believe by their client that the individual referred to by them as “John Dunlop” was a CIS registered contractor.
13.	Taking into account these comments, RA & Co had prepared a revised income and expenditure account for the period to 30 November 2003, which they enclosed with their letter. The account showed a net profit of £22,011, which exceeded the net profit as previously declared by £1,499, giving an addition tax liability of £329.78.
14.	In her response dated 2 November 2005, Mrs Jackson commented that as the CIS vouchers had been issued to Mr Bryant and not the company and had been processed against Mr Bryant’s record, this income should be reflected in the accounts of Mr Bryant. There had been no vouchers processed against Mr Bryant’s record in respect of John Dunlop Scalabrine, but Mr Bryant’s record indicated that tax had been deducted at source. She asked RA & Co to let her have these CIS vouchers so that she could pursue this further. She also hoped that Mr Bryant was feeling much better; she asked whether he was now in a position to provide the items of information previously requested. She supplied a mandate for the information to be produced by his bank if he did not have it available.
15.	On 8 December Mrs Jackson wrote to Mr Bryant enclosing a copy of her letter of 2 November to RA & Co. She had spoken to Mr Akhtar of that firm and he had indicated that he had not had any contact with Mr Bryant recently. In her letter she said that she was aware of Mr Bryant’s recent illness, and did not want to take any action such as holding a meeting with him until he was fully able to deal with such matters. However, she indicated her concerns about the level of profit returned; these concerns had to be addressed. She requested him to provide the documents and information requested by 17 January 2006.
16.	On 1 February 2006, having had no response to her letter of 8 December, Mrs Jackson wrote again to Mr Bryant. Unless he produced the documents and information by 1 March 2006, she would issue a closure notice to the enquiry; the net profits would be increased to £39,527.
17.	On 3 March 2006 Mrs Jackson wrote to Mr Bryant enclosing a Closure Notice to notify him under section 28A of the Taxes Management Act 1970 of her conclusions on completion of the enquiry. The net profit was to be introduced to £39,527, and his return was being amended accordingly. The deduction for capital allowances was £1,083, as claimed. Following the amendment the tax due was £4,934.32. She also wrote to Mr Akhtar of RA & Co enclosing copies of these letters.
18.	Following the notice of appeal given on Mr Bryant’s behalf by RA & Co on 23 March 2006, Mrs Jackson wrote on 29 March to agree postponement of the tax due in respect of 2003-04. She requested RA & Co to set out the grounds for the appeal in full. In their reply dated 6 April they indicated that they were waiting for their client’s response and would let Mrs Jackson know the grounds for appeal in due course. In her response dated 17 May Mrs Jackson set out again the basis for her conclusions; she also indicated that she was arranging for an enquiry to be opened into the company accounts of BMS Plumbing Services Limited. On 27 June 2006 she sent a letter to Mr Bryant enclosing a copy of her letter dated 17 May to RA & Co, to which she was still awaiting a response. Mr Akhtar had told her on 21 June that he had forwarded the 17 May letter to Mr Bryant, but not having had any contact with Mr Bryant, Mr Akhtar was unable to respond to it. She requested Mr Bryant’s response by 14 July 2006.
19.	On 10 July 2006 RA & Co wrote to Mr Bryant to tell him that after a long wait in vain for his response, they were resigning from their appointment to act as his and his company’s accountants and tax advisers.
20.	There has been no contact since June 2006 between Mr Bryant and the Revenue, nor has any explanation of the grounds of appeal been provided either by RA & Co or by Mr Bryant.
Arguments for the Revenue
21.	Mrs Parslow referred to Mrs Jackson’s evidence. RA & Co had argued that Mrs Jackson’s revised figure for turnover was wrong, for two reasons. The first was that some of the income had been shown in the accounts for BMS Plumbing Services Ltd. Mrs Parslow commented that it was not clear why income earned as a sole trader would be shown in this way, and it had not been tested whether this was in fact the case, as no enquiry into that company’s accounts had been undertaken.
22.	The second reason was that the income from John Dunlop Scalabrine should have been included within the schedule of CIS income and not within the amount calculated as other income. Mr Bryant had not produced any CIS vouchers from Scalabrine and the Revenue’s CIS record did not show any income received from Scalabrine. The income which Mr Bryant had shown in his schedule from Scalabrine had therefore been shown in Mrs Jackson’s schedules as included within private customers. Mrs Parslow indicated that if Mr Bryant was able to show that this income was within the CIS, then the amount received would be moved from private customers to CIS income, but the effect on the figure for turnover would remain unchanged. The only issue arising from such reclassification would be tax deducted at source.
23.	Throughout the course of the enquiry, and subsequently, attempts had been made to contact Mr Bryant and to interview him. Mrs Parslow acknowledged that there was no requirement to attend an interview. He had declined to meet with the Revenue officers. There had been no direct contact with Mr Bryant, even after he dispensed with the services of RA & Co.
24.	Mrs Parslow referred to section 50(6) of the Taxes Management Act 1970. This provided that if it was established by evidence at the appeal hearing that the taxpayer was overcharged by a self assessment, the assessment or amounts should be reduced accordingly, but otherwise the assessment should stand good. She referred to the comments of Park J in Hurley v Taylor (1998) TC 268 at p 286 (also reported at [1998] STC 202 at p 217):
“It is well settled by authority that this places the onus of discharging the assessment on the taxpayer. If the commissioners, having heard his case, are uncertain where the truth lies, they must dismiss the appeal and uphold the assessment.”
25.	In the same case Aldous LJ in the Court of Appeal said (at (1998) TC 268 at p 302, [1999] STC 1 at p 9):
“A conclusion by the commissioners that they are unable to decide whether the taxpayer's explanation is true or false has the result that the explanation carries no weight.”
26.	In Nicholson v Morris (1977) TC 95 Walton J said at p 110 (also reported at [1977] STC 269 at p 280):
“ . . . and that is why, of course, the Taxes Management Act 1970 throws on the taxpayer the onus of showing that the assessments are wrong. It is the taxpayer who knows and the taxpayer who is in a position (or, if not in a position, who certainly should be in a position) to provide the right answer . . . ”
He continued:
“It is the duty of every individual taxpayer to make his own return and, if challenged, to support the return he has made, or, if that return cannot be supported, to come completely clean; and if he gives no evidence whatsoever he cannot be surprised if he is finally lumbered with more than he has in fact received. It is his own fault that he is so lumbered.”
27.	In the same case Goff LJ in the Court of Appeal said ((1977) TC at p 119, also at [1977] STC 162 at p 168):
“ . . . the onus was on him to satisfy them [ie the commissioners], which he failed to do, notably because he did not give any evidence.”
28.	Mrs Parslow argued that the onus was on Mr Bryant to support the return which he had made and to demonstrate that he was overcharged by the self assessment. If he failed to do so then the assessments should stand good. She submitted that the appeal should be dismissed.
 Conclusions
29.	I accept Mrs Parslow’s contention that it is for Mr Bryant to show that he has been overcharged by the self assessment as amended following the enquiry into his return. His failure to make any contact with the Revenue following the resignation of his tax advisers has meant that no further explanation has been given for the difference between the figures as originally shown in the return and those proposed by Mrs Jackson. In connection with the payments from John Dunlop Scalabrine, it might have made matters clearer if the suggested enquiry into the company accounts of BMS Plumbing Services Ltd had proceeded as suggested by Mrs Jackson in her letter dated 17 May 2006, but it appears from what Mrs Parslow said in putting the case for the Revenue that no such enquiry had taken place. It is clear from the passages cited above that Mr Bryant needed to provide clear evidence to counteract the conclusions arrived at by Mrs Jackson as a result of the enquiry into his personal self assessment return. In the absence of such evidence, I have to dismiss Mr Bryant’s appeal.
30.	In doing so, I make two comments. The first is that at no stage were the grounds of appeal set out in full, as requested by Mrs Jackson in her letter dated 29 March 2006. As a result of this and the lack of any appearance by or on behalf of Mr Bryant, it has not been clear what the precise basis was for making this appeal. Secondly, it is not clear why this appeal was made to the Special Commissioners rather than to the General Commissioners. Under the present tribunal structure, this is the type of case which would normally be expected to be heard by the General Commissioners. If the grounds of appeal had been clearly stated, it might have been clearer whether it would have been more appropriate for the General Commissioners to hear this appeal.
31.	I should point out to Mr Bryant that under Rule 19 of the Special Commissioners (Jurisdiction and Procedure) Rules 1994, it is possible for a party who was entitled to be heard at a hearing but failed to appear or be represented to apply to a Tribunal for a review of the final determination of an appeal. Such an application has to be made no later than 14 days from the date on which this decision is sent to the parties (unless, for some exceptional reason, the Tribunal allows extra time). Mr Bryant should note that, in order to have this decision reviewed in this way, he must demonstrate that he “had good and sufficient reason for failing to appear or be represented”.

JOHN CLARK

SPECIAL COMMISSIONER
RELEASE DATE: 30 July 2007

SC/3172/2006