[2010] UKFTT 617 (TC)

TC00859

Appeal number:TC/2010/06670 

CORPORATION TAX –out of time appeal against assessment - appellant claimed the collapse in the property market and the inability to raise funds meant it could not deal with its tax affairs properly- permission to appeal dismissed

FIRST-TIER TRIBUNAL

TAX 

	PARK PROPERTY WORLD LIMITED	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		TRIBUNAL:  DAVID S PORTER (TRIBUNAL JUDGE)						 SUSAN C STOTT (MEMBER)			

Sitting in public at 11 Albion Street, Leeds, on 12 October 2010

Azeem Malik, accountant, for the Appellant

Nadine Newham, an inspector of taxes, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.	Kabir Hussain (Mr Hussain), the Managing Director of Park Property World Limited (the Company), wishes to appeal against an assessment to corporation tax raised under enquiries into the years ending 31 March 2005 and 31 March 2006. The appeal is out of time and Mr Hussain states that he and the Company had been given inadequate time to answer the enquires raised by the Respondents (HMRC), both at the time of the enquiry and thereafter up to the date of this appeal. It was difficult for the Company to deal with its tax affairs expeditiously because of the collapse of the property market, and the Company’s inability to obtain appropriate funding from its Bank during the period of the enquiry.  HMRC say that the Company had plenty of time from March 007 to September 2008, the period of the enquiry, to deal with its tax affairs, but it chose not to provide the necessary information for HMRC to conclude its enquiry. The Company has also had plenty of time to deal with its affairs since the closure of the enquiry on 22 October 2008 up to 17 August 2010, the date of the appeal notice. HMRC refused the appeal because the Company does not have a reasonable excuse for the delay and the Tribunal ought not to grant permission for the appeal.
2.	Mrs Nadine Newham, an Inspector of Taxes, appeared for HMRC and produced a bundle of documents for the Tribunal. Mr Azeem Malik, a Chartered Certified Accountant with Rehman Michael & Co, appeared for the Company and called Mr Kabir Hussain, the Managing Director, as a witness, who gave evidence under oath.
3.	We were referred to the case of David Pledger v The Commissioners  for Her Majesty’s Revenue and Customs TC 00624
The facts.
4.	Mr Hussain said that he had been involved, with the help of family members, in both the supply of fast food and property transactions The Company had received a notice on 26 March 2007 from HMRC indicating that they wished to raise an enquiry into the periods ending on 31 March 2005 and 31 March 2006. He told us that prior to the property crash the Company had owned 27 properties, the bulk of which the Company had financed through the HSBC Bank. The Company had an assets value of approximately £5,000,000 at the time. The enquiry had started as the financial markets began to collapse. The Company had 16 properties in 2005, which had increased to 27 properties by 2007. As a result dealing with the business’ affairs became a priority leaving little time for the Company and its staff to deal with the questions raised by HMRC. Mrs Newham told us that there had been ongoing correspondence with the accountants, who had been unable to obtain the necessary information. In an attempt to encourage a response, HMRC had raised three penalties during the enquiry as follows:
      	On 17 January 2008: £50 for failing to produce documents
	On 19 February 2008: £320 for the same default at £10 for 32 days delay
	On 22 April 2008: £1260 for the same default at £20 for 63 days.
        These penalties were also raised for the year to 31 March 2006
In spite of those penalties, the Company had still not provided all the information that HMRC required. The enquiry was closed on 22 October 2008 and the assessment included tax on a loan from Mrs S Begum of £88,601, which had been treated as income and taxed at 19%, creating an increase of £16,720. Mr Choudhary, also of Rehman Michael & Co, wrote to HMRC on 6 November 2009 (some 13 months after the enquiry had been closed) enclosing a bundle of documents which we understand related to the loan from Mrs Begum. These revealed that Mrs Begum had lent the Company £70,000It appears that there had been four loans from members of the family. Mr Hussain stated that he had had difficulty in obtaining details because he had had to rely on the individuals to produce their bank statements. Mr Hussain produced to the Tribunal details of the death of his cousin, Mohammed Yousaf, on 12 June 2008 in a road accident. Mrs Newham submitted that as his cousin had nothing to do with the running of the Company his death could not be an excuse for the Company failing to answer the questions raised by HMRC during the enquiry. Mr Hussain also produced a letter from the HSBC Bank, dated 12 June 2008, indicating that the Bank had not received the Company’s loan account instalment for £16,660.40 and as a consequence enforcement proceedings would be taken if the payment was not made. We were not told whether the payment was made. Mrs Newham submitted that neither of these events would account for the Company’s failure to comply with the enquiry raised by HMRC which was closed in September 2008. They could have no bearing on the Company’s failure to pursue the matter thereafter. Mrs Newham submitted that, in spite of all the apparent difficulties, Mr Hussain appears to have been able to run the Company throughout the period. Furthermore, he had managed to raise £90,000 from another member of his family to have the bankruptcy application against him rescinded on 2 December 2009. The Company had had 30 days from 22 October 2008 to appeal the matter and failed to do so without any reasonable excuse; therefore the Company should not be granted permission to appeal out of time.
The Law
5.	Prior to 1 April 2009 an application to appeal out of time was made to the Tribunal under section 49(2) b of Taxes Management Act 1970. That section required an appellant to show that there was a reasonable excuse for the delay and that the appeal had been made as soon as reasonably possible after the excuse had occurred. After 1 April 2009 Section 29 of The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (the Order) amended section 49 and substituted a new section which deals with appeals to HMRC, reviews and appeals to the Tribunal. Where a notice is given out of time to HMRC the new section 49 requires 3 conditions to be fulfilled. (A) The request to HMRC must be made in writing. (B) HMRC have to be satisfied that there was a reasonable excuse for not giving the notice in time. (C) HMRC have to be satisfied that the request has been made without unreasonable delay after the reasonable excuse has ceased. These provisions mirror the earlier provisions in the Taxes Management Act 1970. 30 days after the date of the review, where there is a review, or 30 days after the date of the assessment new sections 49 G and H provide that an appeal can be allowed ‘only if the Tribunal gives permission’. 
6.	Time limits are imposed for good reasons and cannot be overridden without equally good reasons by the Tribunal. In Ogedegbe v HMRC LON/2009/0200 Sir Stephen Oliver said:
	“While this Tribunal has got power to extend the time for making an appeal, this	will only be granted exceptionally”.
Tribunal Judge Kevin Poole has given a useful explanation of the position under the new Rules in the case of David Pledger v the Commissioners for Her Majesty’s Revenue and Customs TC 00624 in which he states:
“ The Tribunal does have a general obligation to give effect to the overriding objective expressed in Rule 2 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (the Rules) to deal with cases fairly and justly when it “exercises any power under these Rules” or “interprets any rule or practice direction” (Rule 2(3) (a) and (b)). These general obligations must be borne in mind when exercising the case management powers under Rule 5:
	Rule 5(3) …the Tribunal may by direction:
“(3) extend or shorten the time for complying with any rule, practice direction or direction, unless such extension or shortening would conflict with a provision of another enactment setting down a time limit;…”
Rule 20 of the Rules provides:
“(1) Where an enactment provides for a person to make or notify an appeal to the Tribunal, the appellant must start proceedings by sending or delivering a notice of appeal to the Tribunal within any time limit imposed by that enactment…..
(4) If the appellant provides the notice of appeal to the Tribunal later than the time required by paragraph (1) or by an extension of time allowed under Rule 5(3)(a) (power to extend time)
(a) the notice of appeal must include a request for an extension of time and the reason why the notice of appeal was not provided in time; and
(b) unless the Tribunal extends time for the notice of appeal under Rule 5(3)(a) (power to extend time) the Tribunal must not admit the notice of appeal.”
The position therefore appears to be that the apparent statutory discretion under section 49 Taxes Management Act 1970 to permit notice of appeal be given out of time (which has been amended by the Order from the 1 April 2009) is in legal terms overlaid by the “extension of time” provisions of the Rules, which also came into force on 1 April 2009 and must be applied in accordance with the overriding objective set out in the Rules “.
We propose to adopt Judge Poole’s approach that the Tribunal’s discretion in permitting the present appeal to proceed “out of time” is to be applied purely in line with its obligations under Rule 2 dealing with the case “fairly and justly”. In doing so, it has taken into account:
(1)	the guidance given  in the case of Ogedegbe
(2)	The factors listed in Rule 2 (2)
(3)   The fact that the rules at the time when the decisions were first appealable would have required the appellant to show a reasonable excuse for the delay in appealing and no unreasonable delay in bringing the appeal after the excuse ceased.
The decision
7.	We have considered the law and the facts and have decided that permission for the appeal to be heard out of time will not be granted. Mr Hussain told us that there were only 4 members of his family who had lent him money. We consider that a company, of the size of this one, ought to have been able to find sufficient assistance to deal with the enquiry. Properly kept books of the accounts would readily have identified the amount of the loans and who had made them.  We do not accept that the death of his cousin and the difficulties with HSBC Bank in 2008 were sufficiently debilitating, or complicated, to justify no action being taken in this matter until August 2010. The Company decided to ignore requests for information even when penalties were raised for their failure to do so. Such action does not help their cause now when seeking fairness and justice. Nor do we think it helps the Company’s case that they eventually were able to prove that the majority of the money provided by Mrs Begum was in fact one of those loans. There has to be finality in all tax matters and an assessment raised in 2008 should stand when the taxpayer has chosen not to assist HMRC throughout their enquiry. The tax system could not function if a taxpayer was able to re-open an assessment, to which he or she took exception, at any time after the tax liability had been determined. It is appreciated that, as a result of the confirmation that a loan was provided by Mrs Begum, the tax liability would have been reduced. That in itself is not a ground for this Tribunal to grant permission to hear the appeal out of time. It is our view that the information should have been made available at the appropriate time and the Company is author of its own misfortune.  We also understand that HMRC had not raised any further penalties arising from the Company’s lack of co-operation during the enquiry. We consider that it would not have been unreasonable for them to do so. We therefore refuse permission to appeal the assessment
8.	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.

TRIBUNAL JUDGE
RELEASE DATE: 30 November 2010