A special commissioner decided that a letter sent to the taxpayer, as a partner in a firm, informing it of an enquiry constituted a valid notice under TMA 1970, s. 12AC so that a notice under s. 19A(2) requiring information in connection with that enquiry was also valid and penalties were properly imposed for non-compliance.

Facts

The taxpayer company appealed against penalty determinations under TMA 1970, s. 97AA(1)(a) and (b) made on the grounds that notices had been given to the taxpayer under TMA 1970, s. 12AC by an officer of the Board of his intention to enquire into two partnership returns (for the years ending 5 April 2004 and 2005), pursuant to s. 19A(2) the officer had required the taxpayer to furnish the officer with documents, accounts and particulars, none of the documents or particulars had been produced as required, and accordingly liability to penalties arose under s. 97AA(1)(a) and (b).

The taxpayer did not dispute it had received a request for the documents and information, nor that they had not been furnished. However the taxpayer argued that valid notices had not been given in compliance with s. 12AC, and that, as a result, s. 19A could not bite and thus that penalties were not exigible. Section 19A applied only where notice of enquiry had been given.

If it had not been given any requirement purportedly under s. 19A(2) was not a ‘requirement under s. 19A(2)’ and so no penalty could arise under s. 97AA(1). Further, the person to whom the requirement might be addressed was the person to whom the enquiry notice was given and no other. The taxpayer said that no enquiry notices were served on the nominated partner, i.e. the taxpayer, since the letters sent to it were merely courtesy letters written in accordance with good practice with no statutory function.

Issue

Whether the taxpayer had received a valid notice in accordance with TMA 1970, s. 12AC.

Decision

The special commissioner (Charles Hellier) (dismissing the appeal) said that s. 12AC did not require particular formality about the giving of notice. Chambers English Dictionary (7th edn) defined ‘notice’ as intimation, announcement, information, warning. The purpose of the notice was to warn the taxpayer that an enquiry was underway so that he knew questions might be asked and that time-limits might be affected, and to provide a mechanical activation of the enquiry procedure. That did not require something formal: all that was needed was something in writing which informed the taxpayer that an enquiry was underway. Therefore a letter which announced that ‘I intend enquiring into’ a tax return was sufficient to be a notice for the purposes of s. 12AC.

The Revenue officer's understanding of what he was doing did not affect the position. Section 12AC was designed to provide the nominated partner with a warning or intimation of an enquiry: what he received had to be looked at from the recipient's (or at least a reasonable recipient's) perspective not the inspector's. If despite an officer's understanding that he was giving notice of intention his letter was so vague that it could not be taken by the recipient to be such a warning or intimation, then it would not be a notice within s. 12AC. But the notice the taxpayer received was quite clear: it could not have been in doubt that the officer intended to enquire into its returns.

The Revenue manual did not assist the taxpayer. It was not suggested that the taxpayer was such an assiduous reader of the manuals that when it received this letter it thought ‘this is not a notice under s. 12AC, this is simply a courtesy letter, the manual clearly indicates to me that I can ignore it’: if that had been the case then it might have been possible to say that the letters when read with the recipient's adherence to the manuals meant that it did not get a true warning of an enquiry, but the circumstances which would support that conclusion would have to be extreme and would have to support the conclusion that for a reasonable recipient, the letter was not adequate warning or intimation of an enquiry.

(2008) Sp C 670.
Decision released 29 January 2008.