[2012] UKFTT 695 (TC)
TC02364
Appeal number:
TC/2010/00396
Income Tax – Discovery Assessment – double counting of
Foreign Tax Credits – time for making Discovery Assessment – awareness of error
in Self Assessment Tax Return
FIRST-TIER TRIBUNAL
TAX CHAMBER
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KENNETH GOBIE
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Appellant
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- and -
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THE
COMMISSIONERS FOR HER MAJESTY’S
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Respondents
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REVENUE &
CUSTOMS
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TRIBUNAL:
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JUDGE W D F COVERDALE
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MR R PRESHO
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Sitting in public at North
Shields on 22nd July 2011
The Appellant in person
Mrs R Oliver, Officer of HMRC,
for the Respondents
© CROWN COPYRIGHT
2012
DECISION
1.
Mr Gobie appeals two Income Tax Self Assessment Discovery Assessments
dated 22.05.2009 under the provisions of S 29 Taxes Management Act 1970
relating to the tax years 2004/05 and 2005/06. The substantial issue before the
Tribunal is whether he claimed a Foreign Tax Credit twice in his Self
Assessment Tax Return for each of those years and, in particular, whether the
Discovery Assessments in the sums of £10731.97 and £19837.18 respectively give
rise to a recoverable liability for Income Tax.
2.
During the years 2004/05 and 2005/06 Mr Gobie was employed by AMEC in
both the UK and in Nigeria. Tax was deducted by his employers from his earnings
and separate amounts were paid to HMRC in the UK and to the Nigerian Tax
authorities. The tax payments were as follows:
YEAR
TOTAL UK TAX NIGERIAN TOTAL TAX
EARNINGS TAX
2004/05 54749
3863.40 10116.85 13980.25
2005/06 100276
12230.42 19837.18 32067.60
3.
No Self Assessment Returns were issued to Mr Gobie for the years 2004/05
and 2005/6 but paper Returns were received by HMRC under cover of a letter
dated 17.11.2006 from his Accountant. These generated repayments of Income Tax
namely:
·
2004/05 £9989.90 on 08.02.2007
·
2005/06 £19835.18 on 16.01.2007.
4.
Subsequently the Self Assessment Tax Returns were reviewed by HMRC and
it was found that the above details had in fact been entered as:
YEAR
EARNINGS UK TAX FOREIGN TAX CREDIT
(NIGERIAN
TAX)
2004/05
54749 13980.25 10116.85
2005/06
100276 32067.60 19837.18
5.
It is therefore now apparent that the total tax had been entered as UK
Tax i.e. including the Nigerian tax. There had been double counting. On
26.11.2008 HMRC wrote to Mr Gobie advising that he had, on his Self Assessment
Tax Return, claimed the Foreign Tax Credit twice. Mr Gobie’s accountant replied
and provided copies of the forms P60 provided to Mr Gobie by his employer AMEC.
The accountant acknowledged that the Self Assessment Returns were incorrect and
that the Foreign Tax Credit had been claimed twice but maintained that the
errors were a consequence of misleading information on the forms P60 provided
by the employer.
6.
Thereafter, on 22.05.2009, HMRC issued the Discovery Assessments that
are the subject of this appeal.
7.
In his letter of appeal Mr Gobie says that his Self Assessment Tax
Return was submitted online and he never requested a tax rebate; he assumed
that all facts and figures had been checked; he has not intentionally claimed
the tax refund twice; HMRC should be responsible for the mistake.
8.
On behalf of HMRC Mrs Oliver, the Presenting Officer, has observed that
no online Return was ever received by HMRC: it was the paper Returns sent on
17.11.2006 that were processed by HMRC.
9.
The Tribunal observes that the (incorrect) figures recited in Paragraph
4 above were, in fact, taken from Mr Gobie’s Returns and it was from those
Returns that “overpayments” of the sums mentioned in Paragraph 3 originated.
10.
Section 29 of the Taxes Management Act 1970 deals with the matter of
discovery of a loss of tax and defines when an assessment can be made: S29(3)
sets out two conditions, either of which must be met before an assessment can
be made. It is the second of those conditions that is in issue before the
Tribunal today. S29(5) states that:
(5) The second condition is that at the time when an
officer of the Board –
(a) ceased to be entitled to give notice of his intention to enquire into the
taxpayer’s return ....... in respect of
the relevant year of assessment; or
(b) informed the taxpayer that he had
completed his enquiries into that return,
the officer could not have been reasonably expected, on the basis of the
information made available to him before that time, to be aware of the
situation .....
11.
Section 29(6) defines ‘information made available’ as (paraphrased):
(a)
Contained in the taxpayer’s return or accounts, statements or documents
accompanying it;
(b)
Contained in any claim by the taxpayer;
(c)
Contained in documents, accounts or particulars produced by the taxpayer
during an enquiry;
(d)
Information the existence of which could reasonably be expected to be
inferred from information falling within paragraphs (a) to (c) above or is
notified in writing by the taxpayer to an officer ....
12.
Mr Gobie’s Returns were submitted by letter dated 17.11.2006; the window
of enquiry for HMRC for both years therefore closed on 17.11.2007.
13.
It is apparent that the trigger for HMRC being alerted to the
overpayment was the receipt of the Employer’s PAYE Returns by way of forms P14
in respect of Mr Gobie. These were submitted by the Employer on a date after
17.11.2007. It was not until 26.11.2008 that HMRC wrote to Mr Gobie about his
2004/05 and 2005/06 Self Assessment Tax Returns and thereafter there was
further correspondence about the apparent double claim in respect of Nigerian
tax and this led eventually to the Discovery Assessments the subject of this
appeal.
14.
The Tribunal acknowledges that a significant factor leading to the
incorrect completion of Mr Gobie’s Self assessment Returns, and the
inappropriate reference to “overpayments”, was the unclear and possibly
misleading P60 forms supplied by his employer. These contained manuscript
alterations indicating smaller (but correct) amounts of UK tax deducted from earnings but Mr Gobie’s accountant used the original (incorrect)
figures in completing his Return. The accountant has acknowledged, by letter
dated 26.03 2009, that in consequence “the tax returns were not correct”. Mr
Gobie has clearly relied upon his accountant in the matter of completing the
returns and the Tribunal takes this opportunity of confirming that there has
been no dishonesty on his part.
15.
P60 forms are evidently not routinely sent by employers to HMRC. The
employer sends P14 forms to HMRC but these only contain reference to UK tax, not overseas tax. Mrs Oliver, the Presenting Officer, has produced a bundle of
those P14 forms to the Tribunal and they do indeed refer only to UK tax, not Nigerian tax. She explains that HMRC does not routinely scrutinise P14 forms
and will only do so if there is reason to question a tax return; the forms are
submitted by the employer as part of PAYE Returns.
16.
The Tribunal concludes that at the time when HMRC’s window of enquiry
closed (17.11.2007) it had relied entirely upon information supplied by Mr
Gobie and his accountant in his Self Assessment Tax Return and had no knowledge
of the error made in completing that Return. HMRC could not reasonably have
been expected, from information provided in writing by Mr Gobie or otherwise,
to be aware of the loss of tax.
17.
Mr Gobie or his accountant could have checked the figures on the P60
forms themselves and indeed, because the P60s could be considered misleading,
it would have been prudent to do so in the light of the manuscript alterations,
the amounts that had been detailed as Nigerian tax credits and the calculated
overpayments. Confirmation could have been sought from AMEC as to actual UK tax and foreign tax.
18.
The Discovery Assessment for the year 2004/05 in the sum of £10731.97
includes £1812.00 in respect of “additional income”. Mr Gobie’s appeal relates
to the entire Discovery Assessment but there have been no submissions or
argument today about the tax on that additional income. Since it does not
appear to be in dispute the Tribunal concludes that it has properly been
included in the Discovery Assessment for the year 2004/05.
19.
While Mr Gobie placed the blame for this situation on his accountant and
his employers this did not affect the correctness of the decision of HMRC to
recover the overpayment.
20.
Therefore the Discovery Assessments were properly made. They include the
correct amounts of income and tax deducted in the UK and Nigeria. They reflect the correct liabilities and were correctly made under S29 Taxes
Management Act 1970. The amounts of the Assessments are recoverable from Mr
Gobie. This appeal is dismissed.
21.
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.
W D F COVERDALE
TRIBUNAL JUDGE
RELEASE DATE: 23 October 2012
