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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Revenue And Customs v Sanders [2021] EWHC 1843 (Ch) (07 July 2021) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2021/1843.html Cite as: [2021] EWHC 1843 (Ch) |
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BUSINESS AND PROPERTY COURTS OF ENGLAND
AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTER OF ALAN CHARLES DEVILLE (DECEASED)
A N D
IN THE MATTER OF THE INSOLVENCY ESTATES OF DECEASED PERSONS ORDER 1986
Fetter Lane London EC4A 1NL |
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B e f o r e :
____________________
THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS |
Applicant |
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- and - |
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MICHAEL COLIN JOHN SANDERS (as Trustee in ![]() ![]() |
Respondent |
____________________
MR ROBIN MATHEW QC (instructed by Coyle White Devine) appeared on behalf of the Respondent.
Hearing date: 15 April 2021
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Crown Copyright ©
COVID-19: This judgment was handed down remotely by circulation to the parties' representatives by email. It will also be released for publication on BAILII and other websites. The date and time for hand-down is deemed to be 10:00hrs on 7 July 2021
Deputy ICC Judge Frith:
Introduction
The facts
The Respondent's position and the Applicants' alternative arguments
The testing of the Proof and the implications of the decision taken by the Respondent
The test on the application
"(1) If a creditor is dissatisfied with the officeholder's decision under rule 14.7 in relation to the creditor's own proof (including a decision whether the debt is preferential), the creditor may apply to the court for the decision to be reversed or varied."
The statutory framework
"[4]. In order to understand the rival arguments, it is necessary first to describe the nature of the statutory scheme of self-assessment to tax. The details have changed from time to time but the basic scheme remains the same. A person may be required by notice to make and deliver a personal return: TMA s 8. The purpose of the return is to establish the amounts to which the taxpayer is chargeable for income tax and capital gains tax. It must provide the information required by the standard form on which it is made together with such accounts and other documents as may be required. The return must include a self-assessment: i.e. an assessment of how much income tax and capital gains tax is payable: TMA s 9 (1). In certain circumstances the taxpayer need not make the assessment himself but in that event HMRC will make it on his behalf, send it to him; and it will be treated as a self-assessment: TMA s 9 (2), (3) and (3A). Where a return is delivered to HMRC, HMRC may enquire into the return. The unrestricted power to open an inquiry is subject to time limits: TMA s 9A. Once under way an enquiry is brought to an end by a Closure Notice: TMA s 28A."
"an amount of tax which is payable or repayable as a result of the amendment or correction of a self-assessment under (a) section 28A is payable (or repayable) on or before the date specified by the relevant provision of Schedule 3ZA to this Act."
The date for payment or, as the case may be, repayment is fixed by section 59B (5) of TMA. This provides as follows:
"An amount of tax which is payable or repayable as a result of the amendment or correction of a self-assessment under—
(a) 28A of this Act (amendment or correction of return under section 8 or 8A of this Act), or
(b) ,
is payable (or repayable) on or before the day specified by the relevant provision of Schedule 3ZA to this Act."
The date specified by paragraph 5 of Schedule 3ZA is 30 days after the Closure Notice is given. Therefore, in this case, since the Closure Notice was given on 11 November 2015, any tax arising became payable 30 days later 10 December 2015.
The terms of the Closure Notice and its statutory framework
"(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.
In this section "the taxpayer" means the person to whom notice of enquiry was given.
(2) A Closure Notice must either–
(a) state that in the officer's opinion no amendment of the return is required, or
(b) make the amendments of the return required to give effect to his conclusions. [emphasis added]
(3) A Closure Notice takes effect when it is issued.
(4) The taxpayer may apply to the tribunal for a direction requiring an officer of the Board to issue a Closure Notice within a specified period."
"I have amended your tax return in line with my decision:
- It previously showed that you were due a refund of £5,042,837.35
- It now shows you were due to pay £9,339.78
- The difference is £5,052,177.13
I enclose details of my calculations."
THE DEPUTY INSOLVENCY AND COMPANIES COURT JUDGE: So, again, and I am sorry for labouring this point but it is illustrative of what I wanted to see and want to understand, can we go back then and look at the way in which she – that it was dealt with and, specifically, focusing on the Closure Notice? I would just be interested, if you could redraft it – let us just imagine that you are being instructed to perfect this Closure Notice, Mr Mathew, what would be – how would you do it?
MR MATHEW: I would – I would say, "previously showed". "Due to my conclusions set out above", which is what she has done, "in accordance with my decision, I have amended your self-assessment. It previously showed that you were due a refund of £5 million-odd. That was wrong. You are now – your self-assessment now shows that you are due – your liability – sorry, your self-assessment now shows that your liability is £9,339.78 plus £5,042,000 and that is the amount which you are due to pay".
It follows that the only problem with the Closure Notice from a tax law perspective was that it failed to say that Dr Deville's self-assessment return now showed a liability of £9,339.78 plus £5,042,000. In addition to making it clear that there was a difference of £5,052,177.13, it went on to explain that the self-assessment had been updated to reflect that and the he now owed £5,954,255.89 in total, reflecting the tax due plus the return of the repayment and interest.
" following adjustment for the disallowable expenses there is no taxable loss available to be carried back against income of earlier years on a claim under either S64 or S72 ITA07. There is therefore no basis for the adjustment to the 2010/11 tax liability made at Box 14 of the tax calculation summary in your return which resulted in the tax repayment of [£5 million]. This amount has been over-claimed and is repayable in full.
209. This gives a total amount payable of £5,052,177.13 (that is £9,000 + [£5 million repayment]."
This, said Mr Parfitt, was the critical paragraph that clarified any doubt surrounding the Closure Notice and the adjustment to the assessment that Ms Littlewood had made.
Section 114 common intent and understanding
"(1) An assessment or determination, warrant or other proceeding which purports to be made in pursuance of any provision of the Taxes Acts shall not be quashed, or deemed to be void or voidable, for want of form, or be affected by reason of a mistake, defect or omission therein, if the same is in substance and effect in conformity with or according to the intent and meaning of the Taxes Acts, and if the person or property charged or intended to be charged or affected thereby is designated therein according to common intent and understanding."
[33] In Baylis v Gregory [1989] AC 398, 438 this court held that where section 114 applies it gives HMRC or the taxpayer, as the case may be, "the statutory right to claim that the assessment, warrant or other proceeding in question shall not be affected by reason of a mistake etc." This is not a procedural right but a substantive one. It is a right to have the document in question treated as if it had been in the correct form. I cannot see why it should make any difference to that statutory right in which forum the right is asserted. Suppose that HMRC had given a Closure Notice which was correct in all respects except that it had misspelled the taxpayer's name, and HMRC then served a statutory demand based on that Closure Notice. It would be very surprising if, on an application to set aside that statutory demand, thebankruptcy court could not apply section 114 (1) to validate the Closure Notice.
" Lord Dyson did not approach the question from some a priori categorisation of what kind of mistakes were fundamental or gross. Instead he concentrated on the nature and effect of the omission in the particular circumstances of the case. Lord Dyson reasoned as follows at [29]:
"In my view, the failure to state the period in the notice of assessment in the present case falls within the scope of s 114(1). Although the period was not stated, it could be worked out without difficulty. The notice identified the tax year as 2010–11. Mr Donaldson had been told that, if he filed a paper return (as he did), the filing date was 31 October 2011. The SA Reminder document informed him that, since he had not filed his return by the filing date, he had incurred a penalty of £100. It also informed him that, if he did not file his return by 31 January 2012, he would be charged a £10 daily penalty for every day the return was outstanding. This information was reflected in the notice of assessment. Mr Donaldson could have been in no doubt as to the period over which he had incurred a liability for daily penalty. He knew that the start date for the period of daily penalty was 1 February 2012 and the notice of assessment told him that the end date of the period was 90 days later. The omission of the period from the notice was, therefore, one of form and not substance. Mr Donaldson was not misled or confused by the omission. The effect of s 114(1) is that the omission does not affect the validity of the notice."
Failure to raise the challenge earlier – the rule in Henderson –v- Henderson.
The Duty to act fairly and the rule in Ex parte James (1874) LR 9 Ch App 609
[68] While the formulation of the test in the authorities, involving so many phrases with perhaps different shades of meaning, has something of the quality of dancing on pinheads, resolution of this issue lies in going back to the fundamental principle underlying the jurisdiction. The court will not permit its officers to act in a way that it would be clearly wrong for the court itself to act. That is to be judged by the standard of the right-thinking person, representing the current view of society. If one were to pose the question "would it be proper for the court to act unfairly?", only one answer is possible. It is interesting to note that fairness was introduced by some judges in the cases dealing with Ex parte James at a comparatively early stage, but in general "fairness" as a test in substantive, as opposed to procedural, law has grown significantly since many of those cases were decided. Insofar as it involves a broader test than, say, dishonourable, it reflects a development in the standards of conduct to be expected of the court and its officers.
He added:
[69] The application of the principle in Ex parte James in any case will critically turn on the particular facts of that case.
Disposal