[2013] UKFTT 105 (TC)
TC02523
Appeal number: TC/2012/07612
INCOME TAX – Notice for
Production - Was it reasonably required and authorised? – Yes – Parties agree
to vary terms of the Notice – Appeal allowed in part
FIRST-TIER TRIBUNAL
TAX CHAMBER
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SERPOL LIMITED
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Appellant
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- and -
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THE
COMMISSIONERS FOR HER MAJESTY’S
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Respondents
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REVENUE &
CUSTOMS
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TRIBUNAL:
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JUDGE MICHAEL TILDESLEY OBE
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RICHARD THOMAS
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Sitting in public at Bedford Magistrates’ Court, 3 St Pauls Square, Bedford on 9 January 2013
Shyam Pattanni and Nicola
Smith of Accountax Consulting for the Appellant
Paul Reeve, Presenting Officer,
and David Werin, Assessing Officer, for HMRC
© CROWN COPYRIGHT
2013
DECISION
The Appeal
1.
The Appellant appealed against a notice to produce information and
documents issued on 8 November 2011 pursuant to paragraph 1 of Schedule 36 to
the Finance Act 2008.
2.
The notice required the Appellant to produce the information and records
used by it to identify that 106 of the 109 workers noted on the spreadsheet
entitled “S116 Analysis of Associates Payments to 2005/06” performed the roles
of project managers, witness statements takers or worked at home on projects.
3.
In a previous Appeal Serpol Limited v HMRC [2011] UKFTT 174 (TC) involving the same parties released on 14 March 2011, the Tribunal
decided that
(1)
The section 8 Notice
setting out the Appellant’s potential liability for Class 1 National Insurance
Contributions was invalid.
(2)
In respect of the regulation 80 determinations
for income tax for 2002/03 to 2007/08 (inclusive) the Tribunal found that the
Appellant’s associates who supplied services to Bedfordshire Police in the
capacity of disclosure officers, indexers, exhibit officers, and scene of crime
officers were caught by the “agency legislation”. This meant that the income
received by these associates from the supply of their services was classed as
employment income for the purposes of income tax.
4.
This decision provides the context for the issue of the notice of production,
the subject of this Appeal. This Tribunal accepts HMRC’s contention that the
information requested under the notice was necessary to give effect to the
decision released on 14 March 2011. The Tribunal notes that the determinations
for unpaid tax dating back to 2002/03 remained in force.
5.
The existence of these determinations was significant in four respects. First,
they undermined the Appellant’s assertion that the notice was unreasonable because
HMRC was time barred from collecting unpaid income tax of more than six years
old. Second, the Appellant may be at a disadvantage if and when the quantum is
determined if it did not provide the requested information because the onus of
proving the quantum excessive is on the Appellant. Third, the determinations
confirmed the relevance of the request for information for each tax year
starting in 2002/03 to 2005/06. Finally, they justified the conclusion that the
information was reasonably required for the purpose of checking the Appellant’s
tax position.
6.
The parties differed in their interpretation of the effect of the
previous Tribunal’s declaration on the invalidity of the section 8 Notice. The
Appellant was of the view that the declaration precluded HMRC from recovering
alleged arrears of NI contributions. HMRC considered the existence of a
protective claim under the Limitations Act 1980 lodged at Newcastle County
Court on 21 November 2008 enabled it to collect potential arrears of NI
contributions dating back to 5 October 2002. The protective claim covered the
period 5 October 2002 to 5 April 2008 for Class 1 NI contributions of
₤336,156.67. This was not a matter for determination by this Tribunal,
and in all probability would require a decision by the County Court. It was
also not relevant to the issue of the notice for production in view of the
existence of the determinations for unpaid tax dating back to 2002/03.
7.
The Appellant contended that the notice for production was invalid
because it required the permission of an authorised officer for documents dating
back more than six years old. The Appellant also argued by reference to Hansard
reports of debates on the Finance Bill 2008, and HMRC’s internal guidance that
there was no evidence before the Tribunal of an authorised officer performing
his duties in accordance with Parliament’s intention and internal guidance.
8.
HMRC countered by stating that the requirement for authorisation was
only necessary if the notice related to documents created entirely over six
years ago. HMRC pointed out that the notice was issued on the 8 November 2011
and referred to information and records used to compile the spreadsheet “S116
Analysis of Associates Payments to 2005/06”. HMRC submitted that it was
reasonable to conclude that the spreadsheet could not have been created any
earlier than April 2006, in which case the document was within the stipulated six
year period.
9.
HMRC stated that, in any event, Mr R J Martin, an authorised officer,
had given prior approval to the issue of the notice for production by Mr Werin.
HMRC supplied copies of memoranda dated 19 October 2011 and 7 November 2011
from Mr Martin to Mr Werin to evidence this fact. Further Mr Werin gave sworn
evidence that Mr Martin was an authorised officer for the purposes of schedule
36 tax payer’s notice.
10.
Paragraph 1 of Schedule 36 to Finance Act 2008 enables an officer of
HMRC to require a person by notice to provide information and or produce
documents if they are reasonably required for the purpose of checking the
taxpayer’s tax position. Paragraph 20 states that a notice may not require a
person to produce a document if the whole of the document originates more than
six years before the date of the notice, unless the notice is given by or with
the agreement of an authorised officer. Paragraph 59 states that a reference in
Schedule 36 to an authorised officer of Revenue and Customs is a reference to
an officer of Revenue and Customs who is, or is a member of a class of officers
who are, authorised by the Commissioners for the purpose of that provision.
11.
The Tribunal notes that the requirement for the approval of an
authorised officer only applied to documents of more than six years old, not to
information. The Tribunal is satisfied that the notice of production was caught
by the six year rule in relation to documents compiled for the tax years of
2002/03, 2003/04 and 2004/05. In relation to those years the fact that the
spreadsheet was compiled later was irrelevant.
12.
The Tribunal considers that the wording of paragraph 20 was clear and
unambiguous. In this respect the Appellant’s references to Hansard to establish
Parliament’s legislative intention with regard to taxpayer notices was irrelevant.
13.
Under paragraph 20 the sole issue for the Tribunal is whether the notice
was given by or with the agreement of an officer, authorised by the
Commissioners for the purposes of Schedule 36. The Tribunal accepted Mr Werin’s
sworn testimony that Mr Martin was an authorised officer for the purposes of Schedule
36, and that he gained Mr Martin’s prior approval to the notice, which was also
confirmed by the memoranda exhibited in HMRC’s bundle at C19 and C20. Given
these findings the Tribunal is satisfied that the notice was issued with the
approval of an authorised officer. The Tribunal observes that proof of the
authorised status of an officer is normally established by HMRC’s production of
the official list of authorised officers. The Tribunal expressed its surprise
that HMRC did not have the list in its possession at the hearing.
14.
The Appellant’s challenges on whether Mr Martin exercised his
responsibilities as an authorised officer in accordance with Parliament’s
legislative intention and HMRC’s internal guidance were not matters that fell
within the Tribunal’s jurisdiction. The challenges if valid were potentially
issues for judicial review and beyond the Tribunal’s competence which is
derived from statute.
15.
HMRC accepted that the scope of the notice for production was limited to
individuals supplied to Bedfordshire police.
16.
Given the above findings the parties indicated their willingness to reach
an agreement on the terms of the notice of production. The Tribunal directed
that the parties draft a notice for production for approval by the Tribunal by
no later than 4pm on 15 March 2013. The Tribunal also directed HMRC to provide
facilities at an office convenient for the Appellant’s representative to
inspect the official list of authorised officers evidencing Mr Martin’s
authorisation at the relevant date for the purposes of Schedule 36. The reason
for this direction was to give assurance to the Appellant on the authorised
status of Mr Martin. The Tribunal, therefore, decides to vary the order for
production in accordance with the approved order agreed by the parties.
17.
This document contains full findings of fact and reasons for the decision.
Any party dissatisfied with this decision has a right to apply for permission
to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier
Tribunal) (Tax Chamber) Rules 2009. The application must be received by this
Tribunal not later than 56 days after this decision is sent to that party. The
parties are referred to “Guidance to accompany a Decision from the First-tier
Tribunal (Tax Chamber)” which accompanies and forms part of this decision
notice.
MICHAEL TILDESLEY OBE
TRIBUNAL JUDGE
RELEASE DATE: 7 February 2013
