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	United Kingdom Special Commissioners of Income Tax Decisions
You are here: BAILII >> Databases >> United Kingdom Special Commissioners of Income Tax Decisions >> Clarke v Revenue & Customs [2009] UKSPC SPC00735 (08 January 2009) URL: http://www.bailii.org/uk/cases/UKSPC/2009/SPC00735.html Cite as: [2009] UKSPC SPC00735, [2009] UKSPC SPC735, [2009] STI 592, [2009] STC (SCD) 278

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Spc00735

Income Tax – Enquiry under section 9A TMA 1970, requirement to produce and furnish documents under section 19A TMA 1970 – Taxpayer alleging enquiry opened and requirement made for vindictive reasons – Taxpayer arguing that section 19A did not confer authority to require documents to be created – Held: (1) the Tribunal was required to consider the actual purposes of the officer in giving notice under section 19A; (2) on the evidence the officer's purposes were the statutory purposes and were not vindictive; (3) section 19A did empower the officer to require the creation of documents; (4) subject to a minor variation the section 19A requirement was upheld

THE SPECIAL COMMISSIONERS

P C CLARKE Appellant

and –

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents

Special Commissioner: CHARLES HELLIER

Sitting in public in Brighton on 12 September 2008 and in London on 12 November 2008

The Appellant in person

Mrs Chris Cumming for the Respondents

© CROWN COPYRIGHT 2009


 


DECISION

1. Mr Clarke appeals against a notice given to him under section 19A TMA to provide certain documents and information.. His principal ground of appeal is, broadly, that the notice is bad because it has been given for opprobrious reasons. In essence Mr Clarke says that his tax returns are being investigated and documents and particulars are being sought from him as a means for paying him back for his success on behalf of one of his clients, Mr Ades, in an action before the General Commissioners.
2. The hearing of this appeal started in Brighton: there I heard initial argument and the oral evidence of Mr Ades. Mr Clarke made serious allegations against a number of HMRC's officers. Those officers were not present at the hearing in Brighton. They were not called to give evidence and could not be cross examined. I did not feel it proper to reach a conclusion in relation to the allegations Mr Clarke made without hearing the relevant officers. After hearing evidence and argument in relation to the other matters in the appeal I therefore directed that the hearing be adjourned to the soonest practicable date and that evidence from those officers be heard. Before the start of the reconvened hearing I provided an interim decision on the matters which had been raised before me and which would not be affected by the evidence of those officers. I recorded the evidence I had had before me, set out the conclusions I have reached thus far, and explained the directions I made. This final decision encompasses the findings of that interim decision.

The Relevant Legislation

3. Section 9A(1) TMA provides that:

"(1)     An officer of the Board may enquire into a return under section 8 or 8A of this Act if he gives notice of his intention to do so ("notice of enquiry")—

(a)     to the person whose return it is ("the taxpayer"),

(b)     within the time allowed."

4. There is no mention in this provision of reasons for initiating such an enquiry. There is no express restriction on the purpose for which an enquiry may be made and no right of appeal against the instigation of an enquiry. I have no jurisdiction to review the reasons for which Mr Clarke's return was selected for enquiry or otherwise to set aside the enquiry.
5. Section 19A apples where an officer of the Board has given notice of enquiry in accordance with section 9A to a taxpayer. Subsections (1) and (2) provide:

"(1)     This section applies where an officer of the Board gives notice of enquiry under section 9A(1) or 12AC(1) of this Act to a person ("the taxpayer").

(2)    For the purpose of the enquiry, the officer may at the same or any subsequent time by notice in writing require the taxpayer, within such time (which shall not be less than 30 days) as may be specified in the notice—

(a)     to produce to the officer such documents as are in the taxpayer's possession or power and as the officer may reasonably require for the purpose of determining whether and, if so, the extent to which —

(i)     the return is incorrect or incomplete, or

(ii)     in the case of an enquiry which is limited under section 9A(5) or 12AC(5) of this Act, the amendment to which the enquiry relates is incorrect, and

(b)     to furnish the officer with such accounts or particulars as he may reasonably require for that purpose."

Subsections (6) to (11) provide for the making of an appeal against such a notice:

"(6)     An appeal may be brought against any requirement imposed by a notice under subsection (2) above to produce any document or to furnish any accounts or particulars.

(7)     An appeal under subsection (6) above must be brought within the period of 30 days beginning with the date on which the notice under subsection (2) or (2A) above is given.

(8)    Subject to subsection (9) below, the provisions of this Act relating to appeals shall have effect in relation to an appeal under subsection (6) above as they have effect in relation to an appeal against an assessment to tax.

(9)    On an appeal under subsection (6) above section 50(6) to (8) of this Act shall not apply but the Commissioners may—

(a)     if it appears to them that the production of the document or the furnishing of the accounts or particulars was reasonably required by the officer of the Board for the purpose mentioned in subsection (2) or (2A) above, confirm the notice under that subsection so far as relating to the requirement; or

(b)     if it does not so appear to them, set aside that notice so far as so relating.

(10)    Where, on an appeal under subsection (6) above, the Commissioners confirm the notice under subsection (2) or (2A) above so far as relating to any requirement, the notice shall have effect in relation to that requirement as if it had specified 30 days beginning with the determination of the appeal.

(11)   The determination of the Commissioners of an appeal under subsection (6) above shall be final and conclusive (notwithstanding any provision having effect by virtue of section 56B of this Act)."

6. Thus to the extent that the items required appear to me to have been "reasonably required by the officer" for the relevant purpose I am required to confirm the notice; otherwise I must set it aside.

The Background and the contentions in more detail

7. Mr Clarke made a return for the year to 5 April 2006. He signed it on 6 January 2007 and submitted it to HMRC. On 10 October 2007 Mr Alexander, one of the Board's officers wrote to Mr Clarke giving him notice ( in accordance with section 9A and within the time allowed) that he intended to enquire into his return. On 14 November 2007 Mr Alexander wrote to Mr Clarke requiring him to produce certain documents and information. That letter contained 10 headings under each of which a requirement was made.
8. HMRC say that the notice of enquiry was properly given and that the letter of 14 November was notice within section 19A specifying items which fell within section 19A(2)(a) and (b).
9. Mr Clarke says that the enquiry was opened vexatiously and vindictively, and that the items required in the November letter were required for vindictive reasons, and that as a result the notice should be struck down.
10. Mr Clarke says that this approach by HMRC's officers arose in the following way.
11. Mr Clarke is an accountant. One of his clients is Mr Ades. Mr Clarke represented Mr Ades at a hearing before the General Commissioners on 10 June 2007 in which Mr Clarke applied on behalf of Mr Ades for a closure notice. Mr Clarke was successful before the General Commissioners and the closure notice was granted with immediate effect. About this there is no dispute.
12. Mr Clarke says, however, that the inspector dealing with Mr Ades affairs, Mr Shackel, was very upset with this result, and indicated to Mr Clarke that he would regret his success on behalf of his client. He says that the enquiry was opened into his own affairs only a few months after this and that the opening of the enquiry and its conduct had the purpose of making him regret his success.
13. I note at this stage that I have no jurisdiction in relation to the opening of the enquiry. My jurisdiction is limited to the requirements of the section 19A notice.
14. Mr Clarke accepted that his case had three elements:

(i) that a requirement purportedly made under section 19A, but made for vindictive, vengeful or vexatious reasons was not a requirement for items which the officer "reasonably required for the purpose of determining" whether Mr Clarke's return was correct.

(ii) that at the conclusion of the hearing of Mr Ades' case before the General Commissioners Mr Shackel formed an intention to "get back" at Mr Clarke; and

(iii) this intention was given effect by Mr Shackel or other officers procuring that Mr Alexander opened an enquiry into Mr Clarke's return in the course of which, for the purpose of pursuing Mr Shackel's intention, Mr Alexander sought the items required in his letter, knowing that these actions would cause Mr Clarke inconvenience.

15. I should also note that Mr Clarke disputed the power of the officer under section 19A to require him to create certain documents. I deal with that issue at the end of this decision.
16. During the course of the reconvened hearing it became clear to me that Mr Clarke or Mr Ades may have been muddled as to the names of two of the officers who were present at the General Commissioners hearing. Those officers were Mr Shackel and Mr Ellender. I consider the conduct of both officers where relevant.
17. In the remainder of this decision I deal with the issues under the headings set out in paragraph 14 above.

I. The nature of the condition in section 19A(2).

18. Does 19A(2) provided for a wholly objective test: is the question whether the documents specified in the notice were documents which could reasonably be required for checking the return? If so, that question could be answered without regard to the state of mind of the officer who gave the notice.
19. I do not believe that is the proper construction of the section. In the ordinary course there may be little difference between a subjective and an objective approach: if the officer has had regard to all the relevant circumstances and has reached a conclusion on the basis of those circumstances and for the purpose set out in the section, then the question will be whether he could reasonably have reached that conclusion, and I cannot think of a case where that question will not have the same answer as the objective question as to whether the items sought could reasonably have been sought in the circumstances. But for the reasons which follow I do not believe that the condition is so limited: one is required in my view to have regard to the purposes for which the officer who gave the notice reached his decision to give the notice.
20. First, I note the words of subsection (9): the appellate tribunal is required to consider whether the items were "reasonably required by the officer" for the statutory purpose, not simply whether they were so "reasonably required".
21. Second, it seems to me that the objective construction places insufficient weight on the words of subsection 19A(2)(a) and (b): "as the officer may reasonably require"; treating the section as imposing only an objective condition effectively replaces them by " as may be reasonably required" , and yet the draftsman has referred specifically to that officer: it is the documents which that officer may reasonably require for the statutory purpose which are the subject of the notice. The words place an emphasis on the role of that officer and the purpose pursued by his requirement.
22. Mrs Cumming kindly referred me to section 2(4) Commissioners for revenue and Customs Act 2005. That section provides that anything "begun by or in relation to one officer of Revenue and Customs may be continued by or in relation to another". It is not the case therefore ( as I had suggested in my interim decision) that it must be the same officer who gave the section 19A notice as gave the notice of intention to open the enquiry pursuant to which it is given. But that however does not in my view detract from the emphasis in section 19A on the role of the officer giving the notice.
23. Third, I note that the language of section 20 TMA. Section 20(1) provides :

"(1)     Subject to this section, an inspector may by notice in writing require a person—

(a)     to deliver to him such documents as are in the person's possession or power and as (in the inspector's reasonable opinion) contain, or may contain, information relevant to—

(i)     any tax liability to which the person is or may be subject, or

(ii)     the amount of any such liability, or

(b)     to furnish to him such particulars as the inspector may reasonably require as being relevant to, or to the amount of, any such liability."

The language of para (a) is concerned with whether the documents contain relevant information, and makes explicit that what is to be considered in that context is the actual opinion of the inspector. Para (b) deals with the creation of particulars: it uses a formulation closer to that in para (b) of section 19A. It does not seem to me that the natural reading of this provision suggests a different test is required in para (b) from that in para (a). That to me suggests that a subjective test is also required by the language of para (b), and as a result also for para (b) of section 19A(2).

24. In this context I note the judgement of Carnwath J in R v Macdonald & IRC [1998] STC 680. This concerned the powers in section 20 TMA, and requirements made both to produce documents and to furnish documents which the taxpayer was required to create. Those requirements thus concerned matters within both limbs of section 20(1). There is nothing in Carnwath J's judgement which suggests that a different approach should be taken in relation to the test to be applied in para (a): "in the inspector's reasonable opinion" , and that in para (b): "as the inspector may reasonably require". Carnwath J also quotes Mummery J in Kempton v Special Commrs and IRC [1992] STC 823 at 837:

"The power to require the furnishing of specified particulars may put the taxpayer to substantially greater trouble and expense than the power to require the taxpayer to deliver specified documents …In some cases it, having regard to all the circumstances, including the likely amounts involved and the likely cost of compliance, it may not be reasonable for an inspector to require at one sweep extensive particulars going back over a number of years. It may be more reasonable for him to adopt a gradual step by step approach, seeking documents first and then considering in the light of those whether it is appropriate to require the furnishing of particulars."

25. It seems to me that both Mummery J and Carnwath J treated the test in para (a) and (b) of section 20(1) as relating to the actual approach taken by a particular inspector in the circumstances, and considered whether his decision was reasonable rather than whether, objectively, a decision to require the information was reasonable. In particular they treated the clearly subjective test in para(a) – the inspector's reasonable opinion- as having substantially the same meaning as that in para(b) – as the inspector may reasonably require – a formulation which more closely parallels that in section 19A(2)(a) and (b). The point I am concerned with was not at issue before them but I am comforted in my conclusion by their unspoken assumption.
26. Finally I note the comment of Megarry J in Royal bank of Canada v IRC [1972] Ch 665 at 677:

"the wider the powers that Parliament confides to the commissioners, the more important it is that the commissioners should not exercise those powers in an unduly burdensome or oppressive way.".

It seems to me that this comment is apposite in the context of section 19A. It would be surprising if it were intended that the section 19A powers were to be permitted to be operated in a manner more oppressive than those of section 20, and it seems to me that a construction which has regard to the purpose of the officer in exercising those powers is consistent with a presumption that they should be exercised properly for the statutory purpose. It seems to me that it would be oppressive in the extreme to exercise a power for a vengeful purpose.

27. A taxpayer may well question the judgement of an inspector, but normally there will be no serious suggestion that the inspector acted for improper purposes. It does not seem to me that construing the section as permitting an investigation into the purpose of the inspector in making his requirement would seriously adversely affect its normal effectiveness.
28. Mrs Cumming accepts that the test in section 19A is subjective. She says that one officer's view of what it might be reasonable to request may differ from another's. I agree that it is possible for two different decisions to be made both of which may be reasonable. But she suggests that there is a difference between the officer's purpose in issuing a section 19A notice and his motive for doing so. She says that motive is not relevant. The Respondents submit that the motive behind an enquiry or section 19A notice could hypothetically be the wholly improper one of vengeance but (quoting from their written closing submissions):-

"(i) HMRC's case selection process provides adequate checks and balances to prevent an enquiry being opened for improper motives;

(ii)section 19A(9) [appeal procedure] provides an opportunity for an independent review as to whether the items in a section 19A notice are reasonably required. A vexatious requirement would be recognised at that point and the tribunal should set it aside;

(iii)the recourse for an improper motive is to make a complaint to HMRC and if necessary to the adjudicator."

The Respondents give a non tax example of the difference between motive and purpose : "a policeman decides to stop a car to check it is compliant with the road traffic legislation. His motive for stopping the car could be a number of things: a broken light, the car was steering erratically, he was bored or he was simply out to get the driver. The first two would be legitimate motives, the other two would not be, However, whatever his motive, having stopped the car his purpose in examining it is to check whether it is compliant with the law e.g. the brakes, lights were working properly. His motive has no bearing at all on whether the car is compliant."

It seems to me that the answer to this submission lies in the words of section 19A: did the officer require the items "for the purpose of determining whether…the return is incorrect or incomplete", or were they required for another purpose. If the enquiry was opened for a bad purpose, but the officer giving the section 19A notice reasonably required the items for the statutory purpose, then I must uphold the notice; if the enquiry was opened for either a good or a bad purpose, but the officer gave the notice for the purpose of inconveniencing the taxpayer, then the notice cannot have been given for the statutory purpose and I must strike down the notice. Adapting HMRC's example, I am concerned not with the motive for opening the enquiry (stopping the car) but with the purpose of the request (the inspection of the car). I cannot in all cases assume that the purpose of the requirement is the statutory one and that the only issue is whether it was a reasonable for that purpose. In this case I must ask: what was the purpose for which Mr Alexander sought the items, and if it was the statutory purpose then was the request reasonably made. The issue is whether any improper purpose infected Mr Alexander's decision.

II. Did Mr Shackel develop an intention to get back at Mr Clarke at the General Commissioners hearing on 10 June?

29. In relation to this issue I heard the oral evidence of Mr Ades, Mr Clarke's client, I had a witness statement from Mr Clarke and heard his oral evidence, I had before me a copy of a letter from Mr Lindsay (who was Mr Shackel's immediate superior at all relevant times) to Mr Clarke setting out the results of Mr Lindsay's investigation into the allegation made by Mr Clarke and I had a witness statement from Mr Lindsay and heard his oral evidence.
30. I found Mr Ades a frank and honest witness. Mr Ades told me that after the General Commissioners had heard the parties they retired, and then returned to deliver their decision. Their decision was that a closure notice should be given immediately. Mr Ades remembered clearly that the officer presenting HMRC's case was surprised and disgruntled by this decision, and when it was delivered said "what now?" or words to that effect. He recalled that one of the officers was "spitting fire". On leaving the room he also remembered that officer saying to Mr Clarke something like "it won't be the last you will hear of this". His recollection of the precise words was not clear but Mr Ades told me that he heard this fairly clearly and that its import was not simply that that officer would be writing formally to Mr Clarke. He mentioned it to Mr Clarke immediately they were together on their own.
31. Mr Ades did not identify HMRC's officers by name but described the person who made the remark as being shorter, balding and wearing glasses.
32. Mr Lindsay appended to his statement a note of the hearing before the General Commissioners prepared by their clerk (but typed out about a year after that hearing from manuscript notes). That note indicated that Mrs Bowen, Mr Shackel and Mr Ellender attended the hearing for HMRC and that the case was presented by Mr Ellender. Mr Lindsay described Mr Ellender as shorter and balding, and said that the question "what now" (or equivalent words) was likely to have come from Mr Ellender.
33. Mr Clarke says this in his witness statement:

"During the course of the hearing Mr Shackel was rebuked by the Commissioners for not sending in his bundle of documents in advance and was accused of not telling the truth when he told the Commissioners that he still had reason to believe that my client had not declared all his income.

"The Commissioners directed that Mr Shackel issue an immediate closure notice concluding that my client had over paid tax in the sum of £2,886.75. I could see that Mr Shackel was positively seething with anger and humiliation. He said to the Commissioners "what immediately" and they replied "yes immediately". He then gasped in anger.

"On the way out of the room, he moved a little away from his group and whispered to me "you will regret this". This was heard by Mr Ades."

34. Mr Clarke told me that the General Commissioners had not differentiated between Mr Shackel and Mr Ellender. He told me that he thought that Mr Ellender was a slim man with a large ring.
35. It became clear to me that there might have been some confusion in Mr Ades', and Mr Clarkes' minds as to who was Mr Shackel and who was Mr Ellender. For that reason I consider the questions in this section whether or not Mr Ellender or Mr Shackel formed the alleged opprobrious intention
36. In a letter to Mr Lindsay enclosing her typed notes Miss Thomas, the General Commissioners' clerk, says: "I can recall that the normally placid Mr Shackel was, by his demeanour, clearly disappointed at the Commissioners' decision, but he did not as far as I can recall make any comment at the hearing.".
37. Mr Lindsay was Mr Shackel's manager, but at the time of the hearing he was on holiday. When he returned he spoke to Mr Shackel. Mr Shackel told him that HMRC had lost. Mr Lindsay told me that his advice to Mr Shackel was to settle the enquiry and to "move on". Mr Lindsay told me that Mr Shackel was clearly disappointed at the outcome. My impression from Mr Lindsay's evidence was that Mr Shackel was very disappointed.
38. On receipt of Mr Ades' and Mr Clarke's witness statements in this appeal Mrs Cumming sent them to Mr Lindsay and asked him to investigate. Mr Lindsay told me, and I accept that he spoke to all three officers who attended the hearing and that all denied any knowledge of a threat being made to Mr Clarke.
39. Mr Lindsay described Mr Shackel as being a mild mannered man and said that Mr Ellender could be called normally placid. He told me that Mr Ellender said he had been disappointed at the result of the hearing but not particularly disappointed.
40. Miss Thomas' notes of the hearing make no mention of Mr Shackel being rebuked by the General Commissioners.
41. Mr Lindsay's account of what Mr Shackel and Mr Ellender said is of course, second hand evidence. I did not hear evidence from them directly. But putting all this together and giving due weight to the various pieces of evidence it seems to me that Mr Shackel and Mr Ellender were disappointed at the result of the hearing and that Mr Shackel was particularly disappointed. It is in my view likely on the evidence before me that either Mr Shackel or Mr Ellender made a remark to Mr Clarke on the way out of the hearing. That remark may have indicated an intention to appeal or otherwise to pursue the investigation into Mr Ades' affairs or may have been more personal. I believe that it is likely that was the former because of Mr Lindsay's description of his advice to Mr Shackel to settle and to "move on", and his description of Mr Ellender as being less concerned about the outcome.
42. That of course leaves the question of whether or not Mr Shackel or Mr Ellender formed an intention to get back at Mr Clarke personally. It seems to me that it is possible that such an intention was formed but on the basis of the evidence I have related so far it is unlikely that it was. I consider in the next section the evidence relating to the opening of the enquiry, the giving of the section 19A notice and Mr Clarke's subsequent complaints. In that section I consider whether that evidence changes the balance so as to permit the conclusion that it was more likely that one of those officers formed an opprobrious intention and whether if they did that intention infected Mr Alexander's purpose in giving the section 19A notice.

III. Did Mr Alexander have an improper purpose in giving his section 19A notice?

43. I emphasise again at this stage that the only question for me is whether Mr Alexander had an improper purpose in giving the section 19A notice. It is not whether Mr Alexander had an improper purpose in opening the enquiry: that is not a matter in relation to which I have any jurisdiction. Even if he had an improper purpose in opening the enquiry it could be possible that once it had been commenced Mr Alexander's purpose in making his requirements was wholly for the statutory purposes. But it is also possible that if Mr Alexander had an improper purpose in opening the enquiry that purpose could have continued in relation to the requirements of his notice.
44. Mr Clarke makes a number of points about the conduct of this matter generally and in relation to a complaint he made to the Prime Minister. I shall set out the details later. But first I should explain the general thrust of Mr Clarke's submissions.
45. Mr Clarke says that I should take into account the fact that officers of HMRC are ordinary mortals subject to human temptations and human emotions and not inherently or by virtue of their office of a saintly disposition. He says that I have to be satisfied, not beyond all reasonable doubt, but on the balance of probabilities that the section 19A notice was vexatious. He says that the events he describes, although individually might be innocent or coincidental, are, when taken together sufficient to show that it is more likely than not that the notice was vexatious.
46. I agree with Mr Clarke that the standard of proof is on the balance of probabilities. I also accept that I should not proceed on the basis that HMRC's officers are saints: not only was there no evidence before me on which I could conclude that they were, but it also seems to me to be almost universally accepted that there are less good apples in every barrel. I also accept that the coincidence of individually apparently explicable events can at the least point towards a more sinister conclusion.
47. Mr Clarke makes a number of points which he says lead to a conclusion that Mr Alexander's purpose was improper. They are these:

(i) Mr Shackel(or, I interpret, Mr Ellender) was very upset at the result of the General Commissioners hearing;

(ii) prior to that hearing Mr Clarke had written to Mr Lindsay, as Mr Shackel's manager sending his letter "put up or shut up". Mr Lindsay, he says cannot have been happy with that;

(iii) it is thus suspicious that HMRC opened their enquiry after the General Commissioners' hearing of Mr Ades' appeal. The enquiry was opened some 10 months after Mr Clarke had submitted his return but only a few months after the General Commissioners' hearing. Not only was Mr Shackel(/ Mr Ellender) upset by the General Commissioners decision but so must Mr Lindsay have been;

(iv) in 35 years of his experience in dealing with HMRC and its predecessors the approach taken in this case was extraordinary: if the inspector had had concerns about specific items in his return the normal course would have been to write to him with specific enquiries about those items rather then launch a full enquiry and to seek disclosure of everything bar the kitchen sink;

(v) after Mr Alexander had given notice to Mr Clarke that he intended to enquire into his return Mr Clarke wrote to him suggesting that the enquiry had been commenced as a consequence of the results of the General Commissioners hearing. Mr Alexander had replied saying that he had no knowledge of that hearing and indicating that HMRC "do not give reasons for selecting a taxpayer's return for enquiry". That, says Mr Clarke, was an answer to a question he had not asked: clearly Mr Alexander had been primed beforehand by those instigating this enquiry for improper purposes;

(vi) In July 2007, Mr Clarke, before he had received the section 19A notice had written to the Prime Minister to complain about the way in which Mr Ades' enquiry had been handled. He received replies from an official saying that the matter had been referred to the Treasury. There was three months' delay . It was not until December and after some chasing that he received a letter from HMRC's central complaints team. That letter suggested that Mr Clarke discuss his concern with the local complaints office, giving them details of the issues. Mr Clarke was unwilling to hand over his file until he met with the relevant people.

(vii) after Mrs Cumming sent the witness statements to Mr Lindsay, Mr Lindsay had written to Mr Clarke. In that letter Mr Lindsay indicated (among other things) that he had not found any record of a complaint Mr Clarke had made about the matter to the Prime Minister but when Mr Clarke produced copies of the correspondence, Mrs Cumming, in a later letter to Mr Clarke, had accepted that letters had been written to the Prime Minister and his office. It was miraculous that the correspondence had suddenly been found;

(viii) Mr Lindsay's letter indicated that Miss Thomas had provided him with her notes of the General Commissioners' meeting. He did not pass on the caveat in Miss Thomas' covering letter that she had typed up her notes and regretted that" they may not be as accurate and clear as they might have been, but the hearing did take place over a year ago"; nor had Mr Lindsay made any reference to Miss Thomas' comment that the "normally placid Mr Shackel was…clearly disappointed"; instead it merely contained a statement that Miss Thomas did not remember Mr Shackel being "very angry"

(ix) Mr Lindsay's letter robustly concluded that Mr Clarke's allegation was "without foundation"; as well he might in the circumstances;

(x) Mrs Cumming, as soon as she saw the Appellant's witness statements, instead of following normal procedure and asking for the complaint to be investigated by the independent complaints team, asked Mr Lindsay to investigate – the very person who had been humiliated by Mr Clarke's "put up or shut up" letter;

(xi) the section 19A notice had been issued without warning: in Mr Clarke's experience an inspector would normally issue a reminder of a request for documents rather than moving straight to a formal notice; and

(xii) Mr Clarke says that the Revenue have maintained that there was no link between any of the parties involved at the hearing before the General Commissioners and anyone involved in the enquiry into his return. Yet it emerged during Mr Alexander's evidence (in response to a question I had asked) that Mr Ellender works in the same office as Mr Alexander.

48. All this suggested that the enquiry had been opened and the section 19A notice given for improper purposes and that those involved were covering up. The section 19A notice was "clearly designed to do the maximum damage to [Mr Clarke's] business and cause him to devote large amounts of his professional time to comply with it."
49. I now turn to the evidence before me and my conclusions on it.
50. I shall start by saying something about my impressions of Mr Lindsay and his evidence. Having seen and heard Mr Lindsay I found him robust and direct. He did not strike me as someone who would pursue an underhand or devious course of action. In relation to Mr Clarke's "put up or shut up" letter, he said he had received worse. I believe that he had, and that where necessary he would probably give as good as he got. But in my view he would have done so directly and not covertly. Mr Lindsay may not have been the best person in these circumstances to conduct an investigation, and his letter to Mr Clarke should perhaps have been more discursive, but I believe he was not involved in a vindictive pursuit of Mr Clarke, and that he was not involved with covering up such a pursuit by another.
51. In relation to Mr Lindsay's letter Mrs Cumming says that it was only after Mr Clarke had provided copies of his correspondence with the Prime minister's office that HMRC were able to trace the letters. She took me to a copy of an email from a John Downing in HMRC's complaint's team in which on 27 August 2008- after the date of Mr Lindsay's letter – Mr Downing says "However, hands up, I have now found 'the attached' – hadn't occurred to me to search [the database] more widely". She says that Mr Lindsay's failure to find details of Mr Clarke's correspondence with the Prime Minister's office was due to oversight by Mr Downing, and Mr Lindsay's statement that he had been able to find any record of a complaint by Mr Clarke was not misleading.
52. I now turn to Mr Alexander's evidence. I found him a frank and truthful witness. There were no inconsistencies in his evidence and there was no evasion in his replies to questions. I accept, as I believe Mr Clarke was also inclined to do, that Mr Alexander took pride in applying himself to his duties in a professional manner.
53. Mr Alexander's witness statement and evidence in chief made no mention of Mr Ellender, but included the statement that Mr Shackel did not work on the same office as he did. Mr Alexander was present during an earlier part of the hearing in which Mr Ellender's name was mentioned, but the focus of the first hearing (as the result of which Mr Alexander attended the recommenced hearing), and of Mr Clarke's witness statement had been on Mr Shackel. He did not volunteer evidence in relation to Mr Ellender, but gave a straightforward answer when I asked him about Mr Ellender. I did not regard his failure to mention Mr Ellender in his evidence in chief as indicative of any lack of frankness because it was only as the hearing immediately before he gave evidence progressed that it became clear to me at least that it may have been that Mr Ellender and Mr Shackel were confused by Mr Ades or Mr Clarke.
54. I accept Mr Alexander's evidence that:

(i) returns were selected for enquiry by HMRC's risk investigation team. The selection of returns for enquiry would not start until the filing date had passed and the returns had been loaded onto HMRC's computer system. Once that had been done returns were selected by the central team on the basis of particular features identified from time to time by the team. Some returns were also selected randomly. Returns were taken up for enquiry between each April and the following January, and their processing was stagered.

(ii)Mr Clarke's return was passed to him by his manager for enquiry;

(iii) the return came to him with an indication that HMRC's risk analyst had identified four areas of risk within the return:-

(a) expenses were high in relation to turnover;

(b)legal and professional expenses were very high

(c)travel expenses were high in relation to turnover;

(d)the overall result was a loss which was an unusual result for an accountant's business.

And with a recommendation from that team for a full enquiry. There was nothing in that recommendation to suggest that the recommended enquiry was for any purpose other than the investigation of the identified risks

(iv)Mr Alexander considered that these factors merited investigation. He noted that in the "white space" on the return reasons were given for the high legal and professional fees but still considered that this should be checked. He was surprised by the size of the repairs expenditure and concerned that it might reflect a confusion between unallowable capital expense and allowable revenue expense. He was also perturbed by the brought forward losses and wished to investigate the statement in the white space that Mr Clarke had received a legacy which he had used in the business;

(v) these factors convinced Mr Alexander that a full enquiry into Mr Clarke's return was the correct course of action. Two sorts of enquiry could be instigated: a full enquiry, or an enquiry into only one or two aspects of the return. Because of the number of risks identified he considered that a full enquiry was warranted;

(vi) Mr Alexander does not know, or work in the same office as, Mr Shackel;

(vii) Mr Shackel had not communicated with him in relation to Mr Clarke's tax return;

(viii) Mr Alexander works in the same office block as Mr Ellender but on a different floor; he knows Mr Ellender but he sees him only every other week or so when they may pass on the stairs or such like;

(ix) Mr Ellender had not communicated with him about Mr Clarke's tax return;

(x) Mr Alexander decided for himself and without the prompting of any other person which documents and information he required for the enquiry without the assistance of, and without interference from any other person, and he wrote the letter to Mr Clarke of 14 November 2007 seeking those items;

(xi) On 10 October 2007 Mr Alexander wrote to Mr Clarke telling him that he intended to enquire into his return and setting out his request for information. Mr Clarke replied to Mr Alexander on 30 October 2007. He referred to the General Commissioners' hearing and his concern that the enquiry was vexatious. Mr Alexander replied on 1 November saying that he had no knowledge of the General Commissioners hearing, and that HMRC did not give reasons for selecting a taxpayer's return for enquiry. He said this because he had experience of taxpayers asking why their return had been selected for enquiry. On 14 November he wrote making a formal request for the documents and information under section 19A;

55. I should comment on paragraph (v) above. Mr Clarke said that in his experience an enquiry would start with the seeking of specific information in relation to specific aspects of a return; it might later widen into other aspects and there might be other information requests, but it was very rare for everything to be asked for at one go. Mr Clarke candidly said that had Mr Alexander asked only for specific items in relation to particular aspects of his return, he would not have been suspicious of his request and this appeal would not have been made. Mr Alexander replied that where a full enquiry was thought appropriate then the practice of the team in which he worked was to ask for everything at one go. That course of action in his view made life easier for the taxpayer, who would not be faced with a continuing stream of requests for information. Mr Clarke did not agree. It is not for me to say which approach is more convenient, but I find that the form Mr Alexander's of request was inspired by his team practice and was not for the purpose of vexing Mr Clarke. I accept that Mr Clarke has many years experience as an accountant and will have experienced a number of enquiries not clients' tax returns. But it was clear to me that Mr Alexander's experience of enquiries under the self assessment regime was greater than Mr Clarke's.
56. The combined factors noted in paragraph 47 taken with the other evidence above did not dissuade me from my conclusion in paragraph 42 that it was unlikely that either Mr Ellender or Mr Shackel formed an intention to get back at Mr Clarke. Even if such an intention had been formed I was not persuaded that it had been acted upon. Whilst I accept that the officers were upset at the result of the General Commissioner's hearing, I concluded from Mr Lindsay's evidence that his involvement generally and in investigating and reporting Mr Clarke's complaint did not excite suspicion, and from Mr Alexander's evidence relating to HMRC's procedures and those he followed, that the timing of the enquiry and his approach to it were also not suspicious. Taking all Mr Clarke's points together, whilst I accept that it is possible that Mr Shackel and/or Mr Ellender formed an intention to get back at Mr Clarke personally to which they gave effect by using their place in HMRC's bureaucracy to prompt an enquiry and to manipulate Mr Alexander to pursue it in a particular way, in my opinion that did not happen.
57. It is not necessary for me to decide whether or not Mr Clarke's return was selected for enquiry for opprobrious purposes. But I reached my conclusions in relation to Mr Alexander's evidence after taking into account the possibility that the return had been improperly selected. I concluded that even if it had been Mr Alexander's evidence as to his purpose in seeking the items should be accepted. I also took into consideration each of the factors mentioned by Mr Clarke. Given the other evidence found, the coincidence of these issues does not, in my view, weigh sufficiently heavily against Mr Alexander's evidence on this issue.
58. I conclude that Mr Alexander's only purpose in seeking the documents and particulars in his section 19A notice was to determine whether Mr Clarke's return was incorrect or incomplete, and that none of his purposes consisted of a desire to, or to assist any other person to, or to acquiesce in any other person's desire to get back at Mr Clarke for his victory on behalf of Mr Ades at the General Commissions' hearing.
59. In relation to HMRC's practice in relation to section 19A requests I note the following paragraph in HMRC's published manuals:

"You should always aim to cover all the worthwhile risks in your initial request, so as to avoid asking for information piecemeal. This does not mean that you will only have one occasion for requesting documents or information. You will frequently find that the submission of the documents or information initially requested will give rise to further questions. On each occasion your initial request should be informal. You should not normally issue a formal notice unless the taxpayer or agent has failed to produce or provide some or all of the documents or information you have requested."

I was not referred to this passage during the hearing and so do not place reliance upon it, but I hope that Mr Clarke may take some consolation from its terms that Mr Alexander's actions were not totally at variance with the guidance issued to HMRC's officers.

IV. If Mr Alexander's purposes were not improper should the requirements in the section 19A notice be upheld?

60. If Mr Alexander's purposes were not improper, the question remains as to whether the requirements made in his letter of 10 October 2007 were reasonably required by him.
61. In relation to this question Mr Clarke said that, subject to one issue, to which I shall shortly turn, he had no real problem with the requirements. I therefore do not propose to consider them all in detail. But I note that in her skeleton argument, and before me, Mrs Cumming accepted a modification to the requirements: in relation to the requirement to produce the accounts of the business, HMRC did not seek the production of a profit and loss account if there was not one in existence. Mrs Cumming also noted the restriction in the section in relation to a requirement to produce the prime records of his business; these could be required to be produced only if they were within Mr Clarke's possession or power.
62. The issue raised by Mr Clarke was this. He submitted that section 19A could not require a taxpayer to create documents; its ambit was instead limited to the delivery of existing documents to HMRC. He said that there was a difference between the obligations imposed on companies by para 27 Schedule 18 FA1998, which could include an obligation to create documents, and those imposed on individuals by section 19A. He said that in relation to individuals the lack of an obligation to create documents reflected a common law right to remain silent. Companies were not persons for this purpose and were not protected by that right: hence the difference in the statutory provisions.
63. I do not agree. It is clear to me that section 19A may be used to impose an obligation to create certain documents. That in my view is the import of the use of "furnish "in para (b) as compared to the use of "produce" in para(a), and of the reference in para (a) to documents "in the taxpayer's possession or power", and the absence of those words in para(b). Paragraph (b) would be superfluous if Mr Clarke were correct.
64. Dr Brice came to the same conclusion in Accountant v Inspector of Taxes [2000] STC (SCD) 522. I gratefully adopt her reasoning and conclusions (see paras 20 to 22 of her decision).
65. In R(Murat) v IRC [2005] STC 184, Moses J considered an appeal by the taxpayer in Accountant v Inspector of Taxes against a penalty determination following a failure to create and provide a balance sheet pursuant to the section 19A notice upheld by Dr Brice. Moses J considered a number of attacks mounted by Mr Murat on the section 19A regime, including contentions that the obligations imposed on him infringed his rights under the Human Rights Act 1998 to freedom from torture or inhuman or degrading treatment or punishment, and from slavery or enforced labour. He rejected all those challenges. There is nothing in Moses J's judgement which casts any doubt on Dr Brice's decision in relation to the ability given by section 19A to the inspector to require the taxpayer to create certain documents.
66. In Sharkey v Revenue and Customs Commissioners [2006] STC 2026, Etherton J considered whether the imposition of a penalty under section 97AA for failure to comply with a section 19A notice was a breach of the appellant's rights under the Human Rights Act 1998 not to incriminate oneself. He held, relying in part on Murat, that the penalty was not a criminal matter and that there was no scope for the appellant to complain that his privilege to remain silent and not to incriminate himself had been infringed. It seems to me that I can draw support from this that the words of the section should not be read as subject to a limitation against self incrimination.
67. I am not persuaded that there is such a difference between the provisions of section 19A(2)(b) and para 27(1)(b) Sch 18 FA 1998 as Mr Clarke maintains. The first provides for the furnishing to the officer of accounts and particulars, the second with providing such information in such form as the inspector may reasonably request. There may be a difference between the scope of what the officer may require, but both provisions confer a power to require in relevant circumstances the creation of documents by the taxpayer. .
68. Accordingly I find that the notice given by Mr Alexander should be confirmed subject to the minor variation noted in para [61] above and accepted by Mrs Cumming.

CHARLES HELLIER

SPECIAL COMMISSIONER

RELEASED: 8 January 2009

SC 3016/2008