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You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Revenue and Customs, R (on the application of) v The General Commissioners of Income Tax for the Division of Berkshire [2007] EWHC 871 (Admin) (27 April 2007) URL: https://www.bailii.org/ew/cases/EWHC/Admin/2007/871.html Cite as: [2007] EWHC 871 (Admin) |
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QUEEN'S BENCH DIVISION
ADMINISTRATIVE
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
R (on the application of The Commissioners for Her Majesty's Revenue and Customs) |
Claimant |
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- and - |
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The General Commissioners of Income Tax for the Division of Berkshire - and - (1) Mr Stuart James Thomas (2) Mr Roderick Christopher Thomas (3) S&R Thomas Partnership |
Defendant Interested Parties |
____________________
WordWave International Ltd
A Merrill Communications Company
190 Fleet Street, London EC4A 2AG
Tel No: 020 7421 4040 Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
No Counsel appeared for the Defendant
The First and Second Interested Parties appeared in Person
Hearing dates: 19th March 2007
____________________
Crown Copyright ©
Mr Justice Wyn Williams :
"All of the various decisions purported to have been made by the General Commissioners in respect of the three Interested Parties following the hearing on 20 June 2005 and recorded in three decision letters dated 21 June 2005."
The Relevant Facts
" …… inn consideration of proceedings not being taken against any or all of the named parties in respect of the said tax and interest and penalties [the five named parties] hereby jointly and severally offer to pay the [Claimant] the sum of £525,000 (five hundred and twenty five thousands pounds sterling) ("the Sum") in respect of the said tax, interest and penalties, of which £400,000 (four hundred thousand pounds sterling) was paid on 20th April 2004 and the balance of £125,000 (One hundred and twenty five thousand pounds sterling) is payable with this offer letter."
"Dear Sir,
I write to confirm that, at their meeting on 20th June, 2005, the Commissioners considered your application for a closure notice to be issued terminating a Revenue enquiry into your self-assessment return for the period ended 5th April 2001 and 5th April 2003.
The Commissioners considered a document presented to them which was an agreement between the Revenue and Spring Salmon & Seafood Limited, Thomas Lindh Limited, S &R Partnership, Mr RC Thomas and Mr SJ Thomas, dated 24th May, 2004 which, together, which an email from the Group Leader, Tony Maggs, dated 21st May 2004 closed all enquiries into the period covered by the agreement.
The Commissioners considered that you were reasonable in considering that Mr Magg's email 21st May, 2004 led you believe that you have met all your liabilities and that the period covered by the contract – i.e. 6th April 2002 to 5th April 2003 would be treated as closed. Therefore it was not possible for the Revenue to open a further enquiry into that period."
The letter written to IP2 was in identical terms.
The letter written to IP3 provided:-
"Dear Sirs
I write to confirm that, at their meeting of 20th June 2005, the Commissioners considered your application for a closure notice to be issued terminating a Revenue enquiry in your Partnership return for the period ended 5th April 2002.
The Commissioners had previously heard an appeal by the individual partners against their personal self-assessment tax returns when it was found that an agreement which had been reached between the Revenue and your partners obviated any option to open an enquiry into returns that cover the period from 6th April 1998 to 5th April 2002 but because of this decision the Revenue decided not to defend the application of a Closure Notice in this case. The Revenue have accepted the amendments submitted by yourselves to this return dated 30th April 2003."
The Relevant Legislation
"(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.
(2) The time allowed is –
(a) if the return was delivered on or before the filing date, up to the end of the period of twelve months after the filing date;
(b) if the return was delivered after the filing date, up to and including the quarter day next following the first anniversary of the day on which the return was delivered;
(c) if the return is amended under Section 9ZA of this Act, up to and including the quarter day next following the first anniversary of the day on which the amendment was made."
"(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 purposes 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 relate is incorrect, and
(b) to furnish the Officer with such accounts or particulars as he may reasonably require for that purpose."
Section 19A(6) provides that an appeal may be brought against any requirement imposed by a notice under sub-section 2 above to produce any document or to furnish accounts or particulars. The appeal must be brought within the period of 30 days beginning with the date on which the notice is given (see sub-section 7). Sub-section 9 is in the following terms:-
"On an appeal under sub-section 6 above Section 50(6) to (8) of this Act shall not apply but the Commissioners may –
(c) 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 sub-section 2 or 2A above, confirm the notice under that Section so far as relating to the requirement; or
(d) if it does not so appear to them, set aside that notice so far as so relating."
Sub-section (10) and (11) provide:
"(10).where, on an appeal under sub-section 6 above, the Commissioners confirm the notice under sub-section 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 sub-section 6 above shall be final and conclusive (notwithstanding any provision having effect by virtue of section 56 (d) of this Ac)t."
"(1) an enquiry under Section 9A(1) of this Act is completed when an Officer of the Board by notice ("a closure notice") informs the taxpayer that he has completed his enquiries and states his conclusions.
(2) …….
(3) ……..
(4) the taxpayer may apply to the Commissioners for a direction requiring the Officer of the Board to issue a closure notice within the specified period.
(5) any such application shall be heard and determined in the same way as an appeal.
(6) the Commissioners hearing the application shall give the direction applied for unless they are satisfied that there are reasonable grounds for not issuing a closure notice within the specified period."
The Hearing before the Commissioners
"Dr Hill said that the Commissioners had considered the matter and had decided that the agreement included the return period ended the 5th April 2003. That meant there could be no enquiry under self-assessment and section 19A notices are not valid."
In answer to questions by Mr Read, the clerk to the Defendants apparently said that the notices "were not reasonably required" and that this conclusion applied to all three notices.
Discussion
"(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which will reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2) The background was famously referred to by Lord Wilberforce as "the matrix of facts", but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background will reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must for whatever reason, have used the wrong words or syntax: see Mannai Investment Co. Ltd v The Eagle Star Life Assurance Co Ltd [1997] AC 749.
(5) The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania Naviera SA v Salen Rederierna AB [1995] AC 1991, 201:
"if detailed semantic and syntactical analysis of words in a commercial contact is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense""
"The General Commissioners found the following facts proved or admitted
a) The appellants were participators in companies known as Spring Salmon Seafood Limited, Thomas Lindh Limited and in the S & R Thomas Partnership;
b) An agreement was entered into to settle long running inquiries into business affairs of the appellants and their associated companies; and
c) In order to clarify the draft agreement, an email was sent on 21st May 2004 by the Respondent to the Appellants.
9. Having considered the facts which were not in dispute and the arguments before the General Commissioners, it was held that:
a) the Appellants were reasonable in considering that the Respondent's email of 21st May 2004 led them to believe that they had met all their liabilities for the period covered by the contract, that is 6th April 2002 to 5th April 2003 which would be treated as closed;
b) the Revenue should not have opened a further enquiry into the affairs of the appellants during the year 2002/2003 following the agreement; and
c) the Respondent did not offer a defence with regards to the agreement."
"It is acknowledged and agreed by each and all the named parties that liability to interest and penalties under the provisions of the Taxes Act had been incurred by the named parties."
There then follows the extract which I set out in paragraph 8 above. There then follows an important provision. It reads:
"if this offer is accepted by the Commissioners so that a binding agreement ("the Agreement") is constituted with the Scottish company, the English company, the Partnership and we the said Mr Roderick Christopher Thomas and the said Mr Stuart James Thomas all agree that it should be subject to the following terms:"
In my judgment there can be no doubt but that the agreement which was concluded between the parties was upon the terms which then followed.
"1. The sum shall be paid in addition to any duties, interest, search charges or penalties due and payable as per the returns already submitted by any of the named parties for the years or return periods specified in Schedule 1A-1E below.
2. Subject to the following provisions of this Clause, in respect of each of the Named Parties the Agreement shall be final and conclusive in respect of the liabilities for the periods as set out in Schedule 1A-1E.
a. the Scottish company, the English company, the partnership, the said Mr Roderick Christopher Thomas and the said Mr Stuart James Thomas shall not be entitled to claim any relief, allowance, refund or credit in respect of, or depending upon, any liability in Schedule 1A-1E for the payment thereof without the written consent of the Commissioners.
b. The Commissioners shall not be prevented by the Agreement from claiming any additional or other liability arising for any period covered by the agreement as a result of anything occurring outside that period and for that purpose, or for the purpose of establishing any liability outside the period covered by the agreement, they shall be entitled to make assessments and/or determine any such additional or other liability and seek final determination of such assessment and/or determinations, the tax chargeable hereunder shall become due and payable in accordance with the Taxes Act.
c. The Commissioners shall not be prevented by the Agreement from making "discovery" assessments for any period covered by the Agreement if the conditions in Section 29 Taxes Management Act 1970 are satisfied.
d. For the avoidance of doubt, it is acknowledged by the Partnership and by the said Mr Stuart James Thomas and the said Mr Roderick Christopher Thomas that there may be further enquiries in connection with the acquisition of the Partnership's business by the Scottish Company in the return period of 31st July 2002 and that the Agreement is without prejudice to and does not limit any such enquiries."
"Tax arising in respect of Bala Limited or the Maclennan Trust under Section 660A and 739 ICTA 1988 and Section 86 TCGA 1992."
"Tax arising in respect of Bala Limited or Maclennan Trust under Section 660A and 739 ICTA 1988 and Section 86 TCGA 1992."
That is to be contrasted with the description of the liability for the preceding tax years/return periods. In those periods the expression used is "Profits and Gains" and the Claimant concedes that that phrase is apt to cover all potential sources. In contrast, of course, for the period 6th April 2002 to 5th April 2003 the sources are confined to Bala Limited and Maclennan Trust.