Wednesday, March 17, 2010



What do you think ought to happen when HMRC think that you owe tax and raise an assessment on you because you have not declared it, and you appeal against the assessment because you do not believe that you owe the tax and think that you will be able to demonstrate that you don’t?

Well, the law says that you still have to pay the tax; you can’t hang on to the money until the appeal is heard. Of course paying the tax may mean that you can no longer afford to appeal. Does that sound fair to you? It doesn’t seem at all fair to me. However don’t blame Alistair Darling. This was the brainchild of former Chancellor Denis Healey.

Actually it is not quite that bad. You can ask HMRC to hold off collecting the tax until your appeal is heard (as HMRC had to do in the pre Denis Healey days (they had no discretion then)) and if they refuse you can appeal to the tribunal (or before 1 April you appealed to the General Commissioners, an unpaid body of ordinary citizens who most of us thought were renowned for their commonsense).

So the system is fair after all? Tell that to Mr Rogers! HMRC assessed Mr Rogers for tax of 2.7m, which he believes he doesn’t owe. Mr Rogers duly appealed in November 2006 and asked for postponement of the whole of the tax. HMRC agreed to his request. Then 20 months later they changed their mind and asked the General Commissioners to require Mr Rogers to pay the whole £2.7m. The Commissioners fixed a date for a hearing to decide the matter. Mr Rogers’ advisors told the Commissioners that neither they nor Mr Rogers could attend on the day they proposed. So, exercising their renowned commonsense, the Commissioners went ahead without them! HMRC turned up and told the Commissioners that Mr Rogers was seeking to dissipate his assets. They don’t seem to have put forward any evidence to suggest that, but I assume that those Commissioners worked on the non-legal maxim that “there’s no smoke without fire” and they accordingly ordered Mr Rogers to pay the £2.7million.

Many would find it surprising that any body of Commissioners would make such an order for such a large sum without having heard the taxpayer’s side of the story and without, it appears, even bothering to ask whether Mr Rogers was still contending that he owed the money. Personally I am amazed that they did not adjourn the case to hear Mr Rogers.

Where the Commissioners order such a payment and there is a later change of circumstances, either side can ask the Commissioners to reconsider. Mr Rogers engaged new tax advisors who pointed him to an old tax case that might well support his view that he did not owe any tax. Furthermore new information to quantify the amount owed, even if HMRC’s view were to turn out to be right, had become available.

So what did HMRC do next? Wait for the Commissioners to hear the application? No, that would be the fair thing to do. HMRC and fairness seemingly don’t go together. HMRC issued a High Court writ for the £2.7million.

Next the Commissioners heard the taxpayer’s applications. HMRC contended before them that there had been no change of circumstances so they had no power to change their order. After “lengthy consideration” the Commissioners agreed. Mr Rogers appealed to the High Court against the Commissioners decision. In response, HMRC applied to a different bit of the High Court for summary judgement for the £2.7million.

The case came before Mr Justice Floyd. HMRC’s case that is. The High Court has not yet heard Mr Rogers’ application to review the refusal of the Commissioners to reconsider their decision. No one has yet heard Mr Rogers’ appeal against the assessment, so no one yet knows whether or not he owes any tax. The only issue was that HMRC wanted the judge to give summary judgement for the “debt”, presumably so they could go on and bankrupt Mr Rogers. What does it matter whether the tax is legally due? The Chancellor could do with £2.7million so does it really matter what Mr Rogers’ tax liability, if any, really is?

Fortunately for Mr Rogers – and many, including me, would say, for justice – Mr Justice Floyd not only dismissed HMRC’s application for summary judgement but stayed the action.

He thought that a change in legal advice could amount to a change of circumstances and, indeed, that the request for reconsideration has a realistic prospect of success. Whilst he accepted HMRC’s contention that bankrupting Mr Rogers for tax that he may not owe does not wholly deprive him of the right to fight his case, as his trustee in bankruptcy might be prepared to make funds available to fight it, and noted that HMRC had pointed out that if after having been bankrupted Mr Rogers won his case HMRC would not only repay the tax but would pay simple interest as well, he did think that Mr Rogers’ bankruptcy would be “an unjust result … the effect [of which] will not be capable of being remedied by a simple repayment with interest”.

When HMRC put into their new Your Charter, “What you can expect from us … treat you even-handedly”, do you think they had their collective tongue pushed very firmly into their cheek? Or do you think that the above simply reflects their idiosyncratic interpretation of “even-handedly”? To be fair, the Charter does not actually say that HMRC will treat taxpayers “fairly”, so even-handedly could mean that they intend to try to bankrupt everyone for tax that they may well not owe!

Robert Maas


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