The special commissioner decided that it was not appropriate to order a preliminary hearing to determine whether a discovery assessment was competent for the purposes of TMA 1970, s. 29, to be conducted separately and in advance of any hearing to determine whether the taxpayer had been resident in the UK in the relevant tax year, since the issues called for the determination of matters that were common to both and required them to be heard together.

Facts

The taxpayer appealed against a discovery assessment made against him in respect of the tax year 1998—99 and a notice of determination that he was ordinarily resident in the UK in the year of assessment 1998—99. He claimed that he was neither resident nor ordinarily resident in the UK in that year and that the discovery assessment lacked competence as there was no negligence on his part when he completed his tax return. He applied for a preliminary hearing to determine the issue of whether the discovery assessment was competent for the purposes of TMA 1970, s. 29 to be conducted separately and in advance of any hearing to determine the residence question.

The taxpayer argued that his case at the preliminary hearing, if granted, would be that he had made his 1998-99 return in accordance with then prevailing practice. There was little overlap between the discovery point and the other resident and ordinarily resident issues. On that basis the discovery issue could be dealt with as a discreet matter and was, therefore, suitable for a preliminary hearing.

The Revenue contended that the evidence that would be relevant to the determination of the taxpayer's resident and ordinarily resident status would also necessarily be relevant to the issue of whether he negligently completed his tax return on the basis that he was not a resident. The question whether it could be shown that the taxpayer was negligent in filing his self-assessment for that year could not be reached at a preliminary hearing independently of the residence question.

Issue

Whether it was appropriate to order a preliminary hearing of the discovery assessment issue.

Decision

The special commissioner (Sir Stephen Oliver QC) (dismissing the application) said that the basis of the proceedings concerned substantial chargeable gains made during the period of the taxpayer's alleged non-residence and non-ordinary residence. The issue under TMA 1970, s. 29(5) was whether at the relevant time (i.e. when the enquiry period ended at the end of January 2001) the Inland Revenue could not reasonably have been expected, on the basis of the information made available to them before that time, to have been aware that chargeable gains that should have been assessed had not been assessed. The issue of whether or not the taxpayer was negligent in treating himself as non-resident and not ordinarily resident for the purposes of the self-assessment return would depend on the same substratum of facts as would be relevant to the issue of whether he was in fact neither resident nor ordinarily resident during 1998-99. A full hearing of all the facts and evidence including that relating to his resident status would be required to determine both issues.

The case management objective had to be to save expense and ensure that the matter was dealt with expeditiously and fairly. Consistent with that objective, the purpose of a preliminary hearing could only be to decide issues that would dispose of the case or at least substantially reduce the area of dispute. That was not the case here and the proper approach was to determine both issues at the full hearing (Tilling v Whiteman [1980] AC 1 considered).

(2007) Sp C 649.
Decision released 13 November 2007