This Upper Tier decision brings together two Direct Tax cases but may have wider implications.
Both taxpayers, Nigel Rogers, and Craig Shaw, had been assessed penalties for late submission of their personal Tax Returns. Neither taxpayer appeared at the FTT. In June 2019, the same FTT Judge heard the cases without hearings. (Many FTT decisions are decided ‘on paper,’ so this is not, of itself, a concern.) In such penalty cases, the FTT has to decide (1) did HMRC issue a notice to the taxpayer requiring him to submit a Tax Return and (2) did the taxpayer have a reasonable excuse for failure to submit that Return? HMRC have to satisfy the Tribunal of the first issue; the taxpayer has to satisfy the Tribunal of the second issue. If HMRC fail to satisfy on the first matter, the appeal succeeds and the Tribunal does not need to look at the reasonable excuse issue.
The FTT held that HMRC had failed to satisfy it that the notices were not submitted to the taxpayer in question. In neither case had the taxpayer raised this issue; they had relied solely on a reasonable excuse defence. The FTT raised the question on its own initiative. It was this matter that HMRC objected to, hence the Upper Tier Appeal.
A further detail. Counsel for the taxpayers appeared at the Upper Tier acted pro bono. This is a helpful approach when such matters of principle are argued.
Para 16 of the Upper Tier decision lists the four grounds of appeal.
The first ground considered whether the FTT had jurisdiction to consider whether a valid notice had been issued. Following the previous Upper Tier decision in Goldsmith, the Upper Tier held that the FTT did have such jurisdiction. In fact, it held that the current cases were stronger than the taxpayer’s argument in Goldsmith.
HMRC succeeded on the combined second and third ground, whether a formal notice has to be signed by a named HMRC officer. It held that this was not essential.
The fourth ground was whether the FTT could raise a ground of appeal which the taxpayer had not included in his notice of appeal. The Upper Tier held that is was procedurally unfair for the FTT to determine a case without giving HMRC opportunity to respond to the specific point, it did include guidance for the FTT on the validity of notices under TMA 1970, s8 in paras 49-52.
many tribunal appeals are poorly completed. Taxpayers and even Accountants try to argue a general ‘unfairness,’ which is rarely sufficient.
Others raise ‘reasonable excuse’ arguments, which must be clearly stated and evidenced.
This new batch of decisions opens a further ground of appeal at FTT; whether HMRC have issued documents to taxpayers as required by legislation.
These principles apply equally to direct tax and indirect tax appeals.