A special commissioner decided that the Revenue were justified in issuing fixed penalties for failing to comply with notices issued under TMA 1970, s. 19A and further penalties for non-compliance where the taxpayer had provided no reasonable excuse for his non-compliance.

Facts

In 2006, the taxpayer appealed against two notices issued by the Revenue under TMA 1970, s. 19A requiring him to produce specified documents for the tax years 2000-01 and 2001–02, including statements, cheque book stubs, paying in slips and passbooks for all accounts he had the power to operate, whether in the UK or elsewhere, whether in his name or in the name of another person or organisation, including banking accounts, savings accounts, credit card accounts, loan accounts, deposit receipts and safe deposit boxes, building society and co-operative society accounts.

The appeal was dealt with and dismissed by a special commissioner who determined the notices to have effect as if they specified 30 days beginning with determination of the appeal. In effect, the taxpayer was required to produce the documents specified in the notices by 30 August 2006 ((2006) Sp C 554). Following the decision of the special commissioner, the taxpayer obtained the statements relating to one of two of his bank accounts. On inspection of the statements, the Revenue noted that they showed payments to a Barclaycard account of which the Revenue had no knowledge, and for which no statements had been provided. They therefore asked for the missing credit card statements which the taxpayer had problems obtaining until he made an application under the Data Protection Act 1998, after which he was provided with the details sought.

The Revenue also inferred from information provided by a council under TMA 1970, s. 18A, consisting of details of housing benefit paid to tenants of privately rented properties, that the taxpayer held other bank accounts into which rents of properties were paid. In addition to the information provided by the council, the Revenue obtained documents publicly available from HM Land Registry indicating that the taxpayer owned properties other than those the rents of which he had included in his tax returns. His denials failed to satisfy the Revenue that he did not own those properties.

As the Revenue considered the taxpayer had failed to comply with the special commissioners’ determination, they assessed him to a fixed penalty of £50 for each of the tax years concerned, and subsequently also assessed him to a penalty of £5 per day for the period between 28 October 2006 and 24 November 2006, again for each tax year in point under TMA 1970, s. 97AA.

The taxpayer appealed, contending that, although he had initially failed to comply with the requirement to produce the documents made by the special commissioner as he had not been present at the hearing and had not received a copy of the decision, he had complied with the s. 19A notices to the best of his ability and had forwarded the documentation to which they referred immediately he had been able to obtain it from his banks and credit card company.

Issue

Whether the taxpayer had a reasonable excuse for failing to comply with the s. 19A notices by the date specified by the special commissioner.

Decision

The special commissioner (David Demack) (dismissing the appeal) said that, in accordance with standard practice before the special commissioners, a copy of the decision had been released to the taxpayer's representative but no copy had been sent to the taxpayer personally. The taxpayer could not rely on the fact that he personally did not receive a copy of the decision to claim to have a reasonable excuse for failing to comply with it. Quite clearly, his advisers had provided him either with a copy of it or with instructions as to its contents for how else would he have known what was required of him and made efforts to obtain the required documents. The fact that his adviser was out of the country for some four months at the time the special commissioner's decision was released was of no assistance to the taxpayer: he could not expect time-limits in the tax appeal to be extended until his adviser returned to the UK.

The taxpayer argued that his ability to deal with the Revenue's requirements had been seriously affected by his duties as an Imam of the Islamic faith. He had additional duties to deal with in Ramadan, which began at the end of September 2006. However, as the special commissioner's decision required production of the documents by 30 August 2006, the commencement of Ramadan should have had no effect on the production requirement. Section 19A(2A)(a) required the taxpayer to produce to the officer such documents as were in the taxpayer's possession or power and as the officer might reasonably require for the purpose of making a determination for the purposes of s. 9D(1)(a) or s. 12AE(1)(c). Although it was accepted that the taxpayer's initial difficulties in obtaining the Barclaycard statements arose from no fault of his own, it was not until 15 September 2006 that he made application under the Data Protection Act for the statements, by which date the time-limit for compliance with the special commissioner's decision had already expired.

Having considered the taxpayer's evidence with great care, whilst the taxpayer had taken some steps to obtain the information required by the Revenue, he did so at his own pace and totally ignored the timetable laid down by the special commissioner. Accordingly, the taxpayer had not complied with the s. 19 notices before the fixed penalty notices were issued. The Revenue were therefore justified in assessing those penalties. The notices were correct in form and duly authorised.

The taxpayer's failure to comply with the notices continued between 28 October 2006 and 24 November 2006, so that the Revenue were justified in imposing further penalties under TMA 1970, s. 97AA(1)(b). By s. 97AA(1)(b), the Revenue were entitled to impose a daily penalty for continued failure to comply with a s. 19A notice not exceeding the relevant amount (£30) for each day on which the failure continued after the day on which the penalty under s. 97AA(1)(a) was imposed. Moreover, in all the circumstances, the penalty of £5 per day which was notified was reasonable and proportionate.

(2007) Sp C 645.
Decision released 12 November 2007.