[2009] UKFTT 371 (TC)

TC00309
             Appeal number TC/2009/12213

Appeal against estimated and further assessments for 1994-95 and 1995-96  Whether Appellant a Partnership – Whether Notice of Hearing valid – Appeal dismissed – Rules 11, 13 & 31 of the Tribunal (First-tier Tribunal) (Tax Chamber) Rules 2009 – sections 50 & 111 Taxes Management Act 1970 

FIRST-TIER TRIBUNAL

TAX 

	LONDON & ESSEX CLEANING SERVICES (SOUTHERN)	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (income tax)	Respondents

				TRIBUNAL: 	John Brooks (Judge)
						David Williams (Member)

Sitting in public in Colchester on 23 November 2009

Guy Davis, solicitor, instructed by Fox Associates Chartered Accountants, agents for the Appellant, in respect of the adjournment application.
The Appellant did not appear and was not represented for the substantive appeal 

Andrew Martin of HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2009

DECISION

1.	London & Essex Cleaning Services (Southern) appeals against assessments issued in 1994-95 and 1995-96, pre-dating the introduction of self-assessment, and further assessments issued in 2003. The appeals were not heard by the General Commissioners before the abolition of that tribunal and the establishment of the Tax Chamber of the First-tier Tribunal (the “Tribunal”) on 1 April 2009 and, as “current proceedings”, they have come before us by virtue of paragraph 6 schedule 3 of the Transfer of Tribunal Functions and Revenue and Customs Appeal Order 2009.
Background
2.	An estimated assessment, numbered 608 DN 136296 9501, for the year 1994-95 was issued to ‘London & Essex Cleaning Services (Southern)’ on 16 August 1994. This assessment allocated the estimated “Partnership Income” of £90,000 equally “Between Partners” Mr B J Fehilly, Mrs E L Fehilly, Mr T M Williamson and Mrs S J Williamson.
3.	On 23 September 1994 an appeal against the assessment, quoting the assessment number, was made by Fox Associates Chartered Accountants (“Fox”) the Appellants accountants, on behalf of ‘London & Essex Cleaning Services’ on the grounds that “this is a protective appeal”. No application was made for the postponement of tax.
4.	On 22 August 1995 an estimated assessment, numbered 608 DN 136296 9601, for the year 1995-96 was issued to ‘London & Essex Cleaning Services (Southern)’. This assessment allocated the estimated “Partnership Income” of £100,000 equally “Between Partners” Mr B J Fehilly, Mrs E L Fehilly, Mr T M Williamson and Mrs S J Williamson.
5.	An appeal against this assessment, quoting the assessment number, was made by Fox on behalf ‘London & Essex Cleaning Services’ on 29 August 1995 on the grounds that “this is a protective appeal”. As with the previous year’s appeal no application was made for the postponement of tax.
6.	Fox wrote to the Inspector of Taxes on 9 September 1996. Attached to the letter which was headed “Re: LONDON AND ESSEX, CLEANING SERVICES (SOUTHERN)” were “the accounts of the above named partnership, for the year ended 31st May 1993 [which provided the basis for the 1994-95 income tax liability] together with income tax computations, based thereon.” 
7.	The computation showed an adjusted profit of £226,936 and capital allowances of £28,288, giving a taxable profit of £198,648 for 1994-95.
8.	The Inspector sought clarification of several issues arising out of these accounts and, as is clear from his letter to Fox dated 20 January 1997, opened an investigation as he believed that the “declared profits for the year ended 31 May 1993 may have been understated.” 
9.	The accounts of the “partnership” for the year ended 31 May 1994 together with the income tax computations for 1995-96 were sent to the Inspector of Taxes by Fox attached to a letter dated 3 March 1998 with the heading “Re: LONDON AND ESSEX, CLEANING SERVICES (SOUTHERN)”.
10.	The computation showed an adjusted profit of £724,660 and capital allowances of £28,094, giving a taxable profit of £696,566 for 1995-96.    
11.	However, as with the previous year, the accounts and corresponding computations for 1995-96 were not accepted by the Inspector of Taxes. 
12.	On 11 July 2003 further assessments for 1994-95 and 1995-96 were issued to London & Essex Cleaning Services (Southern)’, under s 36 Taxes Management Act 1970 (“TMA”), based on profits of £200,000 and £700,000 respectively.
13.	By a letter dated 30 July 2003, under the heading ‘LONDON & ESSEX CLEANING SERVICES (SOUTHERN)’, Fox lodged “protective appeals against estimated assessments on 11 July with respect to the years 1991-92 up to and including 1995-96.” The letter also stated that this was “without prejudice to any future argument concerning the validity of these assessments” or the “basis upon which such assessments were raised.” 
14.	In the absence of settlement the appeals were listed before the General Commissioners in Basildon on 20 November 2008. However, an adjournment was requested by Fox on the grounds that Mr Albert Fox, a partner in Fox, who had promised to act for ‘London & Essex Cleaning Services’ was not able to attend. 
15.	The adjournment was granted and the appeals were re-listed for 29 January 2009. In a  letter, dated 7 January 2009, from the clerk to the General Commissioners to ‘London & Essex Cleaning Services (Southern)’ which was copied to Fox, the clerk warned “should a further adjournment be sought … unless the Commissioners consider the grounds for the application to be persuasive it is likely that the Commissioners will not allow a further adjournment and proceed with the hearing of the appeal.” 
16.	However, a further adjournment was granted at that hearing for the appeals to be heard by the Tribunal following the abolition of the General Commissioners.
17.	In February 2009 Mr T M Williamson, Mrs S Williamson, Mr B Fehilly and Mrs E Fehilly sought to recover sums paid to HM Revenue and Customs (“HMRC”) against the tax due in accordance with the assessments. A “Letter of Authority” dated 3 March 2009 which was signed by all of them was sent to HMRC by Fox on 5 March 2009 which refers to the Appellant as a “Trading Activity”. This letter also requested that all “future correspondence/communications should be sent” to Fox. 
18.	On 12 May 2009 the Tribunal issued directions to deal with the appeals and a copy of the directions was sent to Fox. In accordance with the first of these directions HMRC sent a copy of “the basic bundle” to the Appellant on 2 June 2009. The appeals were subsequently listed for a hearing in Colchester on 23 November 2009 and notification of this was sent to the Appellant and Fox on 22 September 2009.
19.	Following receipt of the notification of the hearing Fox wrote to the Tribunal on 30 September 2009 stating that this had been sent to ‘London & Essex Cleaning Services (Southern)’ and that “for some time now [Fox] have been attempting to clarify the exact legal status of the above [London & Essex Cleaning Services (Southern)]” which “may well have considerable ramifications as to how this matter should proceed.”
20.	The reply from the Tribunal clerk, dated 26 October 2009, confirmed the date of the hearing stating “if the legal status of the Appellant is an issue relevant to the determination of this appeal then that issue should be raised at the hearing.”   
21.	Following further correspondence between the parties and the Tribunal during the week before the hearing Fox unsuccessfully requested a further adjournment on the basis that in addition to the uncertain legal status of the Appellant the notice of the hearing was invalid as it had not been properly served.   
Adjournment Application
22.	At the commencement of the hearing on 23 November 2009 Mr Davis, who was instructed by Fox, made a further application for an adjournment on the grounds of the uncertain legal status of the Appellant. 
23.	He referred to the ‘Letter of Authority’ of 3 March 2009, which HMRC claimed in correspondence was evidence of a partnership, pointing out that it referred to a “Trading Activity” not a partnership. He also contended that there was nothing within the bundle that referred to a partnership and that HMRC had failed to establish the existence of a partnership.
24.	In addition Mr Davis submitted that as the notice of the hearing was issued to Fox and ‘London & Essex Cleaning Services (Southern)’ and not addressed to the individuals it could not be valid as it deprived them of any opportunity of putting their case to the Tribunal contrary to natural justice and their human rights.
25.	He also submitted that in view of the delays already experienced in this case that there would be no prejudice to HMRC by a further adjournment and invited the Tribunal to make directions to determine these matters as a preliminary issue at a future hearing.  
26.	Mr Martin, for HMRC, produced a letter dated 23 February 1993 from Fox to the Inspector of Taxes to which was attached a form 64-8 signed by Mr B J Fehilly, Mrs E L Fehilly, T M Williamson and Mrs S J Williamson T/A London and Essex Cleaning Services (Southern) “to enable your [tax] District to deal directly with us [Fox] in connection with the Taxation Affairs of the Partnership.”
27.	He explained that the assessments were issued to, and made in the name of, ‘London & Essex Cleaning Services (Southern)’ in accordance with the legislation then applicable, namely s. 111 Income and Corporation Taxes Act 1988 which provided that “where a trade or profession is carried on by two or more persons jointly, income tax thereon shall be computed and stated jointly in one sum, and shall be separate and distinct from any other tax chargeable on those persons or any of them, and a joint assessment shall be made in the partnership name.”
28.	Although there had not always been a reference to the name ‘London and Essex Cleaning Services (Southern)’ as it had sometimes been abbreviated by the omission of ‘(Southern)’ in correspondence from HMRC (and the Inland Revenue previously) Mr Martin said that the same unique reference number had always been used. 
29.	He commented that until the approach of this hearing the status of the Appellant had not been in dispute. The issue had not been raised before the General Commissioners in Basildon on 29 January 2009 which was attended by Mr Williamson, Mr Fehilly and a representative from Fox.
30.	Having considered the application we were of the view that as the Appellant and Fox had been notified of the hearing on 22 September 2009, some two months before the hearing date, and the basic bundle had been provided to Fox on 2 June 2009, given that the proceedings had commenced some 15 years ago, the Appellant, which has had the benefit of continuous professional representation since 1993, or its representative should have been prepared to deal with the issues raised by Mr Davis at the hearing. We therefore refused the application for an adjournment. 
31.	 As he had only been instructed in respect of the adjournment application and was unable to obtain further instructions regarding the substantive hearing of the appeal, despite being granted a short adjournment for this purpose, Mr Davis withdrew leaving the Appellant unrepresented as no-one else was present for the Appellant.
32.	However, we proceeded with the hearing in the absence of the Appellant in accordance with Rule 33 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (the “Rules”) as we were satisfied that reasonable steps had been taken to notify the Appellant of the hearing and that it was in the interests of justice to do so. In so deciding we were mindful of the fact that notices addressed to Mr and Mrs Williamson at their last known address had not been returned undelivered, and also of the clear authority given by them, and Mr and Mrs Fehilly, to Fox both in the form 64-8 and the letter of 3 March 2009.
33.	Having decided to proceed with the hearing in the absence of the Appellant it was necessary to determine the matters raised by Mr Davis, before his withdrawal from the proceedings, namely the legal status of the Appellant and the validity of the notice of the hearing, before considering the appeals against the assessments.
Status of Appellant
34.	Mr Martin’s case was that the Appellant was a partnership. He referred us to the 64-8 form and the letter to which it was attached in addition to the accounts submitted by Fox for the years ended 31 May 1993 and 1994. Both sets of accounts refer to T M Williamson, S Williamson, B J Fehilly and E Fehilly T/A London and Essex Cleaning Southern.
35.	Mr and Mrs Fehilly and Mr and Mrs Williamson were assessed to tax as a partnership in accordance with section 111 TMA, the appeals made by Fox on their behalf were as a partnership and the accounts for the years ended 31 May 1993 and 1994 are partnership accounts, showing capital accounts for all four persons involved, appropriations of profit to those accounts and drawings there from.
36.	Section 1 of the Partnership Act 1890 defines partnership as being “the relation which subsists between persons carrying on a business in common with a view to a profit.” As this definition seems to encapsulate the relationship between those involved with the Appellant ‘London and Essex Cleaning (Southern)’ we have no hesitation in finding, as a fact, that the Appellant ‘London and Essex Cleaning (Southern)’ is a partnership.       
 Notice of Hearing
37.	Rule 31 of the Tribunal  Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (the “Rules”) provides:
The Tribunal must give each party entitled to attend a hearing reasonable notice of the time and place of any hearing …
38.	There can be no doubt that Mr and Mrs Fehilly and Mr and Mrs Williamson as the members of the partnership trading as ‘London and Essex Cleaning (Southern)’ were entitled to attend the hearing of the appeal. The issue, therefore, is whether the notification of this hearing sent to ‘London and Essex Cleaning (Southern)’ and Fox by the Tribunal on 22 September 2009 gave them notice of this hearing.
39.	It appears that the notification was sent to ‘London and Essex Cleaning (Southern)’ at the address of two of the partners (which is also the address to which the 2003 assessments were sent). 
40.	Notification of the hearing before the General Commissioners on 29 January 2009 which Mr Williamson, Mr Fehilly and a representative from Fox attended was also sent to this address which must have been provided to HMRC, to whom appeals were made before the establishment of the Tribunal, by either the partnership or Fox.   
41.	Rule 13(5) of the Rules provides that:
The Tribunal … may assume that the address provided by a party or its representative is and remains the address to which documents should be sent or delivered until receiving written notification to the contrary. 
42.	As the Tribunal has not received any written notification that this address has changed since the adjourned General Commissioners hearing of 29 January 2009 it may be assumed that the notice of the present hearing sent to the Appellant on 22 September 2009 was sent to the correct address and is therefore valid.
43.	In addition to being sent to ‘London and Essex Cleaning (Southern)’ notification of the hearing was also sent to Fox on 22 September 2009. The appeals, which are the subject matter of the hearing, were made on behalf of the Appellant partnership by Fox as its “representative”.
44.	Although Rule 11(2) of the Rules requires a party who appoints a representative to “send or deliver to the Tribunal and to each party to the proceedings written notice of the representative’s name and address” this was not the case before the establishment of the Tribunal where it was the practice of HMRC and the clerk to the General Commissioners to deal with the representative acting under the authority of the Appellant as confirmed by the existence of the 64-8 form.
45.	Given that the appeals with which we are concerned were made on 23 September 1994, 29 August 1995 and 30 July 2003 we consider that is “fair and just” to either disapply or waive the written notice requirement under paragraph 7(3)(b) of the Transfer of Tribunal Functions and Revenue and Customs Appeal Order 2009 or Rule 7(2)(a) of the Rules and adopt the practice in operation when the appeals were made as it is clear in this case that Fox is the representative of the Appellant.
46.	Rule 11(4) provides that any document which is required to be provided to the Appellant is also to be provided to the appointed representative and if the document is provided to the representative it “need not” be provided to the represented party (Rule 11(4)(a)). Rule 11(4) (b) allows a party (in this case the Tribunal) to assume that a representative’s appointment continues until the contrary is notified in writing;  no such notification was received in this case, and, of course, there is no need for such an assumption here, because it was clear that Fox remained acting throughout.  
47.	Therefore, even if it could not be assumed that the notice of hearing had been sent to the Appellant, the fact that it was sent to Fox on 22 September 2009 is sufficient to have given each party entitled to attend reasonable notice of the time and place of the hearing and as such would be valid notification of the hearing.
48.	We therefore find the notice of the hearing sent to the Appellant and Fox on 22 September 2009 to be valid.
Appeals against Assessments 
49.	Mr Martin referred to s 50(7) TMA which enables us to reduce an assessment if it appears on the evidence that it overcharges an appellant and increase an assessment if it appears on the evidence that an appellant is undercharged.
50.	It is clear from the authorities (e.g. T Haythornwaite and Sons Ltd v Kelly (HM Inspector of Taxes) 11 TC 657) that it is for the Appellant to show that an assessment is incorrect. The only evidence submitted by Fox on behalf of the Appellant in relation to the assessments under appeal are the accounts for the years ended 31 May 1993 and 1994 and corresponding tax computations for 1994-95 and 1995-96 which Mr Martin explained were accepted by HMRC. Mr Martin also explained, in his submissions to us,  that HMRC had reviewed its papers to ensure that the two tax years in question were unaffected by the commencement or cessation provisions which applied to trading profit assessments under the pre-self assessment regime, or by the special rules concerning the transition to that regime, and that he was satisfied that no such adjustments were necessary.
51.	In the absence of any other evidence we dismiss the appeal and increase the assessable profits for 1994-95 from £90,000, as shown in the assessment dated 16 August 1994, to £198,648; and increase the assessable profit in the 1995-96 assessment of 22 August 1995 from £100,000 to £696,566 in line with the profits shown in the accounts and tax computations for those years as submitted by Fox on behalf of the Appellant.
52.	As the full profits of the Appellant have been assessed as a result of this increase we reduce the assessments issued in July 2003 to £nil.
53.	The hearing having taken place in the absence of the Appellant, the Appellant has a right to apply for this decision to be set aside pursuant to Rule 38(2)(d) of The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (“the Rules”).  The Appellant has a right to apply for permission to appeal against this decision pursuant to Rule 39 of the Rules.  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.

John Brooks
TRIBUNAL JUDGE
RELEASE DATE: 17 December 2009