[2011] UKFTT 39 (TC)

TC00916

Appeal number: TC/2009/15695

Appeal against amendments made to partnership returns based on the findings made in an enquiry into a later tax year – whether HMRC were correct to do so and properly issued the amendments under the discovery provisions in the lack of any evidence from the Appellant to displace the amendments

FIRST-TIER TRIBUNAL

TAX 

	MR WILLIAM BATE	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		TRIBUNAL: S.M.G.RADFORD	 (TRIBUNAL JUDGE)						J.SHILLAKER			

Sitting in public at Reading County Court on 17 November 2010

 The Appellant did not attend 

Mr J. Lloyd for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.	This is an appeal against the amendments made to the partnership tax returns for 1998/99 to 2001/02 inclusive.
2.	The case had been delayed and the subject of several postponement applications on the part of the Appellant who applied that the case be postponed as he was in the process of entering into an Individual Voluntary Arrangement.
3.	A recent postponement application had been made by the Appellant in a telephone call to the Tribunal Service in September 2010. This had been refused by HMRC on the grounds that this would not affect the outcome of the appeals to be determined. More recently the Appellant had again applied for a postponement on the grounds of his ill health but provided no evidence of this.
4.	HMRC stated that while they were not unsympathetic they felt that there was a need to finalise this long running appeal as the appeals against the original assessments were received as long ago as December 2007.
5.	The Tribunal examined the papers and decided that in view of the long period which had elapsed and HMRC’s earlier patience that in the interests of fairness and justice the hearing should go ahead.
Background and facts 
6.	During the tax years under appeal the Appellant traded in partnership with Mrs Daphne Fulbrook running a second-hand car business. Mrs Fulbrook ceased to be a partner on 31 July 2003.
7.	On 14 December 2004 an enquiry was opened under Section 12AC of the Taxes Management Act 1970 (“TMA”) into the partnership’s tax return for 2002/03. On 26 January 2006 an enquiry was also opened under Section 12AC TMA into the partnership return for 2003/04.
8.	The enquiry into tax year 2002/03 was concluded with additions to the profit of £10,395. This was as a result of firstly the Appellant being unable to identify the sources of deposits into his bank account and secondly because there were additional cash sales of old stock. The latter point was effectively dropped from the other years by HMRC when a review by them concluded that this was a one-off sale of old stock. Only the additional income based on the unidentified bankings in the 2002/03 year has been pursued. These bankings totalled £5,436 and estimates for the later years were based on this figure although they are slightly lower.
9.	On 26 November 2007 a notice of assessment was issued under Section 29 TMA for tax year 2003/04 showing additional tax due in the amount of £3,150.
10.	On 27 November 2007 notices of assessment were issued under Section 29 TMA showing additional tax due in amounts of £2,600 for tax year 1998/99; £2,030.40 for tax year 1999/00; £2,447.71 for tax year 2000/01 and £2,755 for tax year 2001/02.
11.	On 20 December 2007 the Appellant appealed against the assessments for 1998/99 to 2001/02 inclusive and for 2003/04 on the basis that the returns submitted were correct.
12.	On 15 January 2008 a notice was issued under Section 28B(4) TMA for tax year 2002/03 amending the Appellant’s self-assessment return following the closure of the enquiry. The notice showed a £3,308.56 increase in the tax due for that year and the Appellant did not make a formal appeal in writing against this amendment.
13.	On 27 July 2009 Haines Watts Chartered Accountants, who were acting for the Appellant at that time, asked for a formal review. On 10 September 2009 the review under Section 49E TMA was concluded. The reviewing officer upheld the appeals because of procedural errors in the way the assessments were issued. However he concluded that it would still be possible for further assessments to be issued and on that basis reviewed the substantive points of the appeal.
14.	As a result of this notices were issued on 2 October 2009 amending the partnership’s returns for 1998/99 to 2001/02 inclusive and a closure notice was issued for 2003/04 showing no amendment to the partnership’s return. 
15.	The reviewing officer concluded that if valid assessments were issued the additions to the partnerships profits would be £3,500 for tax year 1998/99; £4,000 for tax year 1999/00; £4,500 for tax year 2000/01; £5,000 for tax year 2001/02.
16.	On 7 October 2009 the accountants appealed against the amendments to the partnership returns issued on 2 October 2009 and notified the appeals to the Tribunal on 29 October 2009.
17.	The notices under appeal had been issued under the discovery provisions of Section 30B(1) TMA and were based on findings established during the enquiry into the 2002/03 partnership return.
18.	No appeal was made in respect of the 2002/03 year and the Appellant paid the tax due for this year plus the interest which had accrued.
Appellant’s Submissions
19.	Haines Watts’ appeal dated 29 October 2009 stated that the grounds for appeal were that the disputed assessments for the years under appeal were wrong as HMRC did not advise the Appellant at the time of their enquiry into the 2002/03 tax year that the information which he provided would also be used for the previous tax years which are the subject of this appeal. Had he been so informed at the time he would have been able to produce information to refute the assessments. Since then the accountant who was acting for him at the time has died and it was no longer possible to recreate that information.
20.	Haines Watts no longer represent the Appellant and in February 2007 the Appellant had offered to pay £8,500 which would have covered most of the tax due.
HMRC Submissions
21.	Mr Lloyd for HMRC said that by February 2007 the Appellant knew that HMRC were looking at other years. Letters addressed to the previous accountants dated 3 January 2006 and 23 August 2006 confirming this were produced to the Tribunal.
22.	HMRC contended that they would automatically pursue adjustments for earlier years when it had been conceded that there were omitted sales in the year of enquiry.
23.	HMRC submitted that the Appellant was negligent in failing to complete a correct tax return in that year and the findings of that year were used as a basis for discovery in the other years.
24.	The presumption of continuity is a well established principle which has been considered in cases such as Jonas v Bamford (51TC1) and Nicholson v Morris (51TC95) and ample time was granted to the Appellant to provide evidence demonstrating that the other years were different.
25.	The Appellant has had almost five years to provide the relevant bank statements or any other sources of documentation. Whilst the Appellant has had difficulty in obtaining bank statements from Abbey he was originally asked for them in early 2006.
26.	Mr Lloyd submitted that although he had sympathy for the Appellant the onus was on him to provide evidence to displace the assessments raised. The Appellant needed to show that the omitted receipts banked in his private account only occurred in the 2002/03 year so that any additional assessments were limited to that year.
27.	Mr Lloyd submitted that if the Tribunal was convinced by the evidence that the revised partnership profits were excessive then the assessments could be reduced accordingly. However in the light of the fact that no such evidence being produced it followed that the Appeals should be dismissed.
Findings
28.	The onus of proof is on HMRC to show that the amendments to the partnership profits were properly issued under the discovery provisions and we find that they have done so.
29.	The onus of proof is on the Appellant to displace the amendments by producing evidence which demonstrated that they were wrong. We find that the Appellant was unable to do so and although we have sympathy for him in respect of his difficulties with the Abbey Bank which has since been taken over, he has had considerable time in which to obtain the bank statements.
Decision
30.	The appeals are dismissed and the amendments hereby confirmed.
31.	This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

S.M.G. RADFORD

TRIBUNAL JUDGE

RELEASE DATE: 11 JANUARY 2011