Protective assessments and the death of the taxpayer
In Personal representatives of Mr Michael Wood (Deceased) v HMRC [2015] UKFTT 282 (12 June 2015), the FTT found that HMRC could pursue assessments against a taxpayer who had died.
On 2 June 2010, Mr Wood, a dentist, had attempted to make a disclosure under HMRC’s ‘tax health plan’ – a campaign that gave medical professionals an opportunity to tell HMRC about undeclared income by making a voluntary disclosure, in return for reduced penalties. HMRC had considered, however, that the disclosure was not covered by the terms of the Tax Health Plan and had opened a ‘COP 9 investigation’. Code of Practice 9 governs cases where fraud is suspected.
Following a meeting with HMRC, Mr Wood had agreed to commission a disclosure report into his tax affairs by September 2011. The report had not been produced and HMRC had issued assessments against which Mr Wood had appealed. He had died on 22 May 2013. Mr Wood’s widow, who was his personal representative, contended that she would not be able to contest HMRC’s allegations of deliberate behaviour by Mr Wood now that he had died. Therefore, requiring her to contest the disputed assessments would be in breach of the Convention on Human Rights art 6 (right to a fair trial) and would be contrary to the overriding objective of the FTT under Tribunal Procedure Rules (SI 2009/273) rule 2.
The art 6 argument could only succeed if HMRC’s disputed assessments amounted to charging Mr Wood with a criminal offence. His widow pointed out that the extended time limit of TMA 1970 s 36(1A)(a), which HMRC relied upon to raise the assessment, required the tax loss to have been ‘brought about deliberately’. This she thought, amounted to charging the taxpayer with a criminal offence.
The FTT considered, however, that the effect of s 36(1A)(a) was simply to enable HMRC, upon proof of the deliberate bringing about of a loss of tax, to recover from the taxpayer what he should have paid, so that recourse to the extended assessment time limit was not penal in nature. The effect of the provision was not to condemn or punish. As for rule 2, the FTT found that the best achievement of the overriding objective would be obtained by not setting aside HMRC’s assessments. The FTT stressed that the disputed assessments had been raised on a protective basis because the disclosure report had been delayed, and the liabilities under those assessments had crystallised before Mr Wood’s death.
Why it matters: The FTT recognised that it was required to apply a very ‘blunt tool’ to a ‘delicate situation’. It also accepted the difficulties of Mr Wood’s widow. However, it felt that the litigation must follow its course, starting with the submission of the disclosure report.
Protective assessments and the death of the taxpayer
In Personal representatives of Mr Michael Wood (Deceased) v HMRC [2015] UKFTT 282 (12 June 2015), the FTT found that HMRC could pursue assessments against a taxpayer who had died.
On 2 June 2010, Mr Wood, a dentist, had attempted to make a disclosure under HMRC’s ‘tax health plan’ – a campaign that gave medical professionals an opportunity to tell HMRC about undeclared income by making a voluntary disclosure, in return for reduced penalties. HMRC had considered, however, that the disclosure was not covered by the terms of the Tax Health Plan and had opened a ‘COP 9 investigation’. Code of Practice 9 governs cases where fraud is suspected.
Following a meeting with HMRC, Mr Wood had agreed to commission a disclosure report into his tax affairs by September 2011. The report had not been produced and HMRC had issued assessments against which Mr Wood had appealed. He had died on 22 May 2013. Mr Wood’s widow, who was his personal representative, contended that she would not be able to contest HMRC’s allegations of deliberate behaviour by Mr Wood now that he had died. Therefore, requiring her to contest the disputed assessments would be in breach of the Convention on Human Rights art 6 (right to a fair trial) and would be contrary to the overriding objective of the FTT under Tribunal Procedure Rules (SI 2009/273) rule 2.
The art 6 argument could only succeed if HMRC’s disputed assessments amounted to charging Mr Wood with a criminal offence. His widow pointed out that the extended time limit of TMA 1970 s 36(1A)(a), which HMRC relied upon to raise the assessment, required the tax loss to have been ‘brought about deliberately’. This she thought, amounted to charging the taxpayer with a criminal offence.
The FTT considered, however, that the effect of s 36(1A)(a) was simply to enable HMRC, upon proof of the deliberate bringing about of a loss of tax, to recover from the taxpayer what he should have paid, so that recourse to the extended assessment time limit was not penal in nature. The effect of the provision was not to condemn or punish. As for rule 2, the FTT found that the best achievement of the overriding objective would be obtained by not setting aside HMRC’s assessments. The FTT stressed that the disputed assessments had been raised on a protective basis because the disclosure report had been delayed, and the liabilities under those assessments had crystallised before Mr Wood’s death.
Why it matters: The FTT recognised that it was required to apply a very ‘blunt tool’ to a ‘delicate situation’. It also accepted the difficulties of Mr Wood’s widow. However, it felt that the litigation must follow its course, starting with the submission of the disclosure report.
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