Walker v Revenue & Customs [2007] UKSPC SPC00626 (08 August 2007) 

Spc00626

INCOME TAX – Special Commissioners’ Jurisdiction – ss 29 and 46B TMA – whether Part XV TA discovery issue could be heard separately by General Commissioners – appeal only against assessment – objection to Discovery Assessment only on appeal against the assessment – no separate issue here – hearing appeal to be by the Special Commissioners 

THE SPECIAL COMMISSIONERS

JOHN ANDREW WALKER	Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS	Respondents

Special Commissioner:	ADRIAN SHIPWRIGHT (Chairman)

Sitting in public in London on 6 June 2007

Ian McKechnie of Ian McKechnie & Company, for the Appellant

Barry Williams of the Appeals Unit of HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION

Introduction
1.	This is a decision concerning the jurisdiction of the Special Commissioners to hear this matter.  It concerns the Respondents’ application for preliminary ruling on jurisdiction in the appeal against an assessment raised against Mr Walker for the year ended 5 April 2001.  This assessment was raised under section 29 Taxes Management Act 1970 ie is a “Discovery Assessment”.
2.	The Appellant’s primary case is that there was in fact no “Discovery” and that in consequence the assessment should not have been raised.
3.	It should be noted that an urgent request for the hearing of the Discovery Point was delivered to the Clerk to the General Commissioners for East Suffolk by the Appellant’s advisors and a hearing was scheduled for 23 May 2007.  On 14 May 2007 the Respondent applied to the Special Commissioners for a preliminary ruling on jurisdiction in the light of provision of section 29 TMA 1970 and their interpretation of section 46 B (4) TMA.  This decision is concerned with this issue.
The Issue
4.	The essential issue is whether the Special Commissioners have exclusive jurisdiction to hear all matters in this case or whether the “Discovery Point” should be decided in isolation by the General Commissioners.
The Law 
5.	Section 46B(4)TMA reserves all appeals arising under Chapter 1A and 1B of parts 15 TA to the Special Commissioners. Section 46B (Questions to be determined by Special Commissioners) provides (insofar as relevant):

“(1) In so far as the question in dispute on an appeal to which this section applies is a question which under this section is to be determined by the Special Commissioners, the question shall be determined by them. …

(4) Any question as to the application of any of the following provisions … is a question to be determined by the Special Commissioners—

(a)    Chapter IA or IB of XV  (settlements); …
is a question to be determined by the Special Commissioners.”

6.	Section 29 (Assessment where loss of tax discovered) provides (insofar as relevant):

“(1) If an officer of the Board or the Board discover, as regards any person (the taxpayer) and a year of assessment—
(a)     that any income which ought to have been assessed to income tax, or chargeable gains which ought to have been assessed to capital gains tax, have not been assessed, or
(b)     that an assessment to tax is or has become insufficient, or
(c)     that any relief which has been given is or has become excessive,
the officer or, as the case may be, the Board may, subject to subsections (2) and (3) below, make an assessment in the amount, or the further amount, which ought in his or their opinion to be charged in order to make good to the Crown the loss of tax. …
(3) Where the taxpayer has made and delivered a return under section 8 or 8A of this Act in respect of the relevant year of assessment, he shall not be assessed under subsection (1) above—
(a)     in respect of the year of assessment mentioned in that subsection; and
(b)     … in the same capacity as that in which he made and delivered the return,
unless one of the two conditions mentioned below is fulfilled.
(4) The first condition is that the situation mentioned in subsection (1) above is attributable to fraudulent or negligent conduct on the part of the taxpayer or a person acting on his behalf.
(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 under section 8 or 8A of this Act 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 mentioned in subsection (1) above. …
(8) An objection to the making of an assessment under this section on the ground that neither of the two conditions mentioned above is fulfilled shall not be made otherwise than on an appeal against the assessment.”
The Authorities
7.	I was referred to various authorities including the following:
Kodak Ltd 4 TC 549
The King v Kensington Tax Commissioners ex parte
 Aramayo 6TC 279 and 613
Colquhoun v Brookes 2TC 490
Jonas v Bamford 51 TC page 1
Gaughan v HMRC SpC 575
McQueen v HMRC SpC 601
Submissions of the Parties
Appellant  Submissions
8.	Mr McKechnie argued forcefully that there was a separate issue to be considered, namely whether or not there was a Discovery.  If there was no Discovery, then no assessment should have been raised.  Accordingly, no other issue would need to be considered if that matter was decided in favour of the Appellant.
9.	The Appellant asked me to confirm that:
(1)	The matter of Discovery under section 29 TMA can be settled immediately without regard to any other ground of appeal against the 2000/2001 assessment, there being no statutory bar to such consideration, and no contrary precedent in the case law;  
(2)	the provisions of section 46 B (4)(a)TMA are not relevant to the pure matter of fact in deciding whether there has or has not been a “Discovery”;
(3)	the matter of fact as to whether or not there has been a “Discovery” at the date of issue of the 2000/2001 assessment may fall within the jurisdiction of the General Commissioners of Income Tax; and
(4)	the Appellant asked me to treat the Discovery Point as entirely separate from the General Appeal against the assessment.  It was said that there was power for me to do this.
Respondent’s Submissions
10.	It  was submitted on behalf of the Respondent that:
(1)	Section 29 allows Discovery Assessments to be made.
(2)	Section 29(8) TMA prohibits the making of an objection to an assessment on the grounds that subsections (4) and (5) are not fulfilled other than by an appeal against the assessment.
(3)	  It follows therefore that an appeal is made against the assessment as a whole, not a part of it.  Neither does it follow that there is any procedure for hearing part of the grounds of appeal away from the substantive issue except as provided by statute.
(4)	Section 31B TMA provides for appeals to be made to the General Commissioners.  Subsection (1)(b) is an exception to this, being a provision under Part V TMA.  Section 46B(4) TMA makes particular provision for any questions for the application of Chapter 1A of Part XV TA to be determined by the Special Commissioners.
(5)	Section 46B (1) provides that insofar as the question in dispute on an appeal to which this section applies is to be determined by the Special Commissioners, the question shall be determined by them.  This is both directory and mandatory.  There is no saving elective or alternative provision in the relevant legislation.  
(6)	The Appellant is wrong to argue that Discovery is a pure matter of fact.  The requirement is that the Inspector’s opinion includes what is the correct application of the Taxes Act in the particular circumstance, ie a matter of law.  This is the main issue in the main appeal.
(7)	Whilst it is agreed that there is no specific statute provision prohibiting the hearing as a part of the ground of appeal separately by different tribunals from another grounds of appeal, however, no such provision has been made by Parliament for a process of this type.
(8)	The appeal is against the whole of the assessment.  The assessment is made under section 660 ATA.  Accordingly, there is no statutory permission whatsoever to separate a single ground of appeal for a hearing separately or by another tribunal.
(9)	There is some guidance in case law.  
(a)	In Gaughan v HMRC SpC 575 Dr Brice heard the Discovery point at the same time as the substantive issue.
(b)	In McQween v HMRC SpC 601 Stephen Oliver QC (as he then was) again heard the Discovery point of the same hearing as the substantive issue.
(c)	Jonas v Banford 51 TC 1 is but one of a very long series of cases where the judge heard the Discovery and substantive points in the High Courts without demur or comment that both were heard at first instance from an appeal and at the same time.
11.	HMRC therefore submits that:
(a)	hearing the Discovery point as a separate issue is not permitted by Statute;
(b)	that hearing the Discovery point is contrary to the public policies of law and good practice;
(c)	that objection to the Discovery point can only be taken as an appeal against the whole of the assessment;
(d)	that the appeal is against the whole of the assessment and is regulated entirely by section 46 B (4) that there is no case law whatsoever to support the approach preferred by the Appellant, so that the Discovery point is heard not merely as a separate issue, but also by the Tribunal without lawful authorities.  
Discussion
12.	The Special Commissioners jurisdiction to hear a case is limited by Statute.  There is no inherent jurisdiction, there is merely a statutory jurisdiction.  Section 31(1)(d) provides that an appeal may be brought against “…any assessment to tax which is not a self assessment”.  Accordingly, a taxpayer may appeal against an assessment.
13.	Section 29 allows an assessment to be made where there is a Discovery.  Section 29 sets out two conditions at least one of which needs to be fulfilled where the taxpayer has made and delivered a return for the relevant year of assessment for section 29 to apply.  Subsection (8) provides “an objection to the making of an assessment under this section on the grounds that neither of the two conditions mentioned above are fulfilled shall not be made otherwise than on an appeal against the assessment”.
14.	In essence, what the Appellant is seeking to do is to say that neither of the two conditions were fulfilled in his particular circumstances such that the assessment should not have been raised.  Accordingly, section 29 (8) is engaged.  
15.	In my view, the Appellant can only object to the validity of the assessment on the grounds that either of the two conditions were fulfilled by appealing against the assessment.  Accordingly, there is no separate ground of appeal against the Discovery assessment.
16.	It may be that under a supervisory jurisdiction it would be possible to consider whether or not the assessment should have been made.  However, under the statutory provisions as in existence at present there is only power to hear an appeal.  The taxpayer can only appeal against an assessment and can only raise the issue of the non fulfilment of the two conditions on an appeal against the relevant assessment before the Commissioners.
17.	I therefore conclude that there is no statutory provision allowing an appeal against the making of the Discovery assessment other than by appealing against the assessment.
18.	The assessment is an assessment that relates to section 660A TA.  Accordingly, statute provides that this should be heard by the Special Commissioners.  Section 46B in subsection (1) provides “insofar as the question in dispute on an appeal to which this section applies to the question which under this section is to be determined by the Special Commissioners, the question shall be determined by them”.  As I understand this section it provides that the substantive issue as to the application or not of section 660A TA is to be decided by the Special Commissioners.  The effect of the provisions in section 29(8) TMA is that the issue as to whether the conditions for making the Discovery assessment were fulfilled is to be heard as part of the determination of the assessment.  Whilst it is arguable that the question of the Discovery assessment is not a question of the matter (ie does section 660A TA apply) to be decided by the Special Commissioners that hear the appeal, that does not seem to me to be the better interpretation.
19.	It seems to me from a purposive approach that what was intended by Parliament was that the Special Commissioners should hear the appeal against the Part XV case and that this should include all aspects of the case.  I am strengthened in this view that an appeal is only possible against an assessment or determination and Part XV appeals are to be heard by the Special Commissioners which include the validity of the Discovery Assessment.
20.	If I am wrong on this then I consider that as a matter of convenience the whole of the issues relating to this case should be heard together and if required to do so I would so direct.  I must do this recognising that I have no power to direct what the relevant General Commissioners should or should not do.  However, it seems to me that for administrative convenience and saving of costs one hearing is preferable to several different hearings at which different views and conclusions on the same facts and matters could be reached.  
21.	Accordingly, I conclude that there is no statutory jurisdiction for a separate hearing of the “Discovery Point” on its own.  This is because those points are to be heard at a determination of the appeal.  That appeal can only be heard by the Special Commissioners.
22.	Accordingly, I conclude that the appeal should be heard by the Special Commissioners.
23.	I direct that a directions hearing in this case to progress it should be set down as soon as practicable after the House of Lords decision in Jones v Garnet is announced.  
24.	I make no order as to costs.  

ADRIAN SHIPWRIGHT
SPECIAL COMMISSIONER

RELEASE DATE: 8 August 2007

SC/3104/2007