Spc00645
INCOME TAX — penalties imposed under section 97AA of TMA 1970 for non-compliance with notices under s.19A TMA— notices not complied with — appeals dismissed

THE SPECIAL COMMISSIONERS

 
 	
	MR MOHAMMED AFSAR	Appellant

	- and -

THE COMMISSIONERS FOR
	HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

				Special Commissioner: David Demack

Sitting in public in Manchester on 1 November 2007

Mr Allam of Messrs Shaw & Co, accountants, for the Appellant 

Miss June Kennerley of Her Majesty’s Commissioners for Revenue and Customs for the Respondents  

	© CROWN COPYRIGHT 2007

DECISION

1.	In 2006, the appellant, Mr Mohammed Irshad Afsar, appealed against two notices issued by Her Majesty’s Commissioners for Revenue and Customs (“the Commissioners”) under section 19A of the Taxes Management Act 1970 (“the TMA”).  The notices required him to produce the following documents for the tax years 2000/01 and 2001/02:
“For the year ended 5 April 2001 (5 April 2002), statements, cheque book stubs, paying in slips and passbooks for all accounts you had the power to operate, whether in the UK or elsewhere, whether in your name or in the name of another person or organisation, including banking accounts, savings accounts, credit card accounts, loan accounts, deposit receipts and safe deposit boxes, Building Society and Co-operative Society accounts”.
2.	The appeal was dealt with and dismissed by Mr Michael Tildesley OBE, a Special Commissioner.  In his decision, released on 31 July 2006, Mr Tildesley determined the notices to have effect “as if they specified 30 days beginning with determination of this Appeal”.  In other words, Mr Afsar was required to produce the documents specified in the notices by 30 August 2006.  
3.	As the Commissioners considered Mr Afsar had failed to comply with the Special Commissioners’ determination, they later initially assessed him to a fixed penalty of £50 for each of the tax years concerned, and subsequently also assessed him to a penalty of £5 per day for the period between 28 October 2006 and 24 November 2006, again for each tax year in point.  The assessments were made under section 97AA of the TMA which provides as follows:
	“Failure to produce documents under Section 19A
(1)	Where a person fails to comply with a notice or requirement under Section 19A(2), (2A) or (3) of this Act or paragraph 6(2) or (3A)(b) of Schedule 1A to this Act, he shall be liable, subject to subsection (4) below —
a.	to a penalty which shall be £50, and 
b.	If the failure continues after a penalty is imposed under paragraph (a) above, to a further penalty or penalties not exceeding the relevant amount for each day on which the failure continues after the day on which the penalty under that paragraph was imposed (but excluding any day for which a penalty under this paragraph has already been imposed).
(2)	In subsection (1)(b) above “the relevant amount” means —
a.	in the case of a determination of a penalty by an officer of the Board under section 100 of this Act, £30;
(4)	No penalty shall be imposed under subsection (1) above in respect of a failure within that subsection at any time after the failure has been remedied.”	
4.	The documents sought by the Commissioners covered three separate matters: bank statements, Barclaycard statements and documents relating to the ownership of various properties.  
5.	Mr Afsar held personal accounts with two banks: Barclays plc and First Direct.  Following Mr Tildesley’s decision, he obtained the statements relating to one of two of his accounts with First Direct and his representatives, Messrs Philip Shaw & Co, forwarded them to the Commissioners on 11 September 2006.  On inspection of the statements, the Commissioners’ assessing officer, Mr A D Clarke, noted that they showed payments to a Barclaycard account of which the Commissioners had no knowledge, and for which no statements had been provided.  He therefore asked for the missing credit card statements.  (I shall deal with the production of those credit card statements later in my decision).  
6.	In the letter accompanying the bank statements, Messrs Shaw & Co indicated that statements for the other account with First Direct and that with Barclays would follow. The Barclays statements did follow on 25 September 2006, and on 18 October 2006 so too did those for the second First Direct account.  
7.	The Commissioners had information that Mr Afsar was a trustee of certain trusts which had accounts with Barclays and, considering that he might have benefited from them, required sight of the bank statements relating to them.  By fax of 19 September 2006, Messrs Shaw & Co informed the Commissioners that Mr Afsar no longer acted as a trustee “for the organisations that he was a trustee for during the period 6 April 2000 to 5 April 2002.  During the time that he was a trustee, he had no control over the bank accounts”.   As I understand the situation, the Commissioners are still not satisfied that Mr Afsar did not benefit from the trusts but, solely for present purposes, accept that he did not.  I proceed on the basis that he did not.  
8.	The Commissioners also inferred from information provided by Bradford City Council under section 18A of the TMA, consisting of details of housing benefit paid to tenants of privately rented properties, that Mr Afsar held other bank accounts into which rents of properties were paid.  In addition to the information provided by the City Council, the Commissioners obtained documents publicly available from HM Land Registry showing that one Mohammed Irshad or Mohammed Irshad Afsar owned properties other than those the rents of which Mr Arshad had included in his tax returns.  In interview with the Commissioners, Mr Afsar denied that he was the Mohammed Irshad or Mohammed Irshad Afser shown as the registered owner of the properties in question, which denials he repeated in evidence.  His denials satisfied neither the Commissioners, nor me.  
9.	Although he had made some attempts to obtain Barclaycard statements, tt was not until 15 September 2006 that Mr Afsar made application pursuant to the Data Protection Act to Barclaycard Visa for details of his credit card transactions in the two tax years in question.  He then had to make application for statements relating to two accounts, for one account he had held in April 2000 had been closed, Barclaycard having found “unusual transactions” on it.  Mr Afsar had then opened a new account to which Barclaycard had transferred only “genuine transactions”.  Perhaps not surprisingly in the circumstances, particularly as the Commissioners had no knowledge of events leading to the closing of the one account and the opening of the other, they found it difficult to reconcile the figures on the statements relating to the accounts.  (The Commissioners still do not accept that the figures on the two accounts can be reconciled.  Having seen the correspondence from Barclaycard, I am satisfied that they can).  Notwithstanding the problems with his Barclaycard accounts, I find that Mr Afsar failed timeously to make application for the necessary statements.  The Barclaycard statements and other instructions relating to the accounts were not produced to the Commissioners until 14 December 2006.
10.	On 27 October 2006, the Commissioners issued the two fixed penalty notices of £50 under section 97AA(1)(a) of the TMA for Mr Afsar’s failure to comply with the section 19A notices.  As they received nothing further from him or his representatives in the following month, they then proceeded to issue two penalty determinations under section 97AA(1)(b) of the TMA in the sum of £5 per day each, a total of £140, for Mr Afsar’s continuing failure to comply with the two section 19A notices.  And it is against the penalties referred to in this paragraph that Mr Afsar now appeals.  
11.	Before me, in evidence Mr Afsar maintained that he had initially failed to comply with the requirement to produce the documents made by Mr Tildesley as he had not been present at the hearing and had not received a copy of the decision.  Messrs Shaw & Co were on record as representing Mr Afsar in the proceedings and Mr Allam of that firm did in fact represent him before Mr Tildesley.  In accordance with standard practice before the Special Commissioners, a copy of the decision was released to Messrs Shaw & Co. but no copy was sent to Mr Afsar personally.  In my judgment, Mr Afsar cannot rely on the fact that he personally did not receive a copy of the decision to claim to have a reasonable excuse for failing to comply with it.  Quite clearly, Messrs Shaw & Co provided him either with a copy of it or with instructions as to its contents for how else would he have known what was required of him and made efforts to obtain the required documents.  That Mr Allam of Messrs Shaw & Co was out of the country for some four months at the time Mr Tildesley’s decision was released is, again in my judgment, of no assistance to Mr Afsar: he could not expect time limits in the tax appeal to be extended until Mr Allam returned to the UK.  
12.	Mr Afsar also claimed to have complied with the section 19A notices to the best of his ability and to have forwarded the documentation to which they referred immediately he had been able to obtain it from his banks and credit card company.  For the various reasons I give in this decision, I do not accept that he did so. 
13.	Further, Mr Afsar maintained that his ability to deal with the Commissioners’ requirements had been seriously affected by his duties as an Imam of the Islamic faith.  He had additional duties to deal with in Ramadhan, which 30 day period began at the end of September 2006, and those duties “impinged on his evenings and nights as well as his mornings and afternoons”.  As Mr Tildesley’s decision required production of the documents by 30 August 2006, the commencement of Ramadhan should have had no effect on the production requirement.
14.	Mr Allam submitted that Mr Afsar’s difficulties in obtaining the Barclaycard statements arose from no fault of his own.  Section 19A(2A)(a) required him “to produce to the officer such documents as are in the taxpayer’s permission or power and as the officer may reasonably require for the purpose of making a determination for the purposes of section 9D(1)(a) or 12AE(1)(c) of this Act”.  Mr Allam maintained that Mr Afsar had demonstrated that obtaining the statements earlier than the date on which they had been obtained was outside his power.  I accept that the closure of Mr Afsar’s original Barclaycard account may have resulted in his having problems obtaining statements relating to the two accounts but, as I mentioned earlier, it was not until 15 September 2006 that he made application under the Data Protection Act for the statements; and by then the time limit for compliance with Mr Tildesley’s decision had already expired.  
15.	Taking all the difficulties Mr Afsar had experienced as a whole, Mr Allam also submitted that he had a reasonable excuse for not complying with the decision of Mr Tildesley by 31 August 2006, so that his appeal should be allowed, and the penalty determinations reduced to nil.  
16.	Having considered Mr Afsar’s evidence with great care and Mr Allam’s submissions likewise, I conclude that whilst Mr Afsar took some steps to obtain the information required by the Commissioners, he did so at what might be described as his own pace, and totally ignored the timetable laid down by Mr Tildesley.  I find that Mr Afsar did not comply with the section 19 notices before the fixed penalty notices were issued.  The Commissioners were therefore justified in assessing those penalties: the notices were correct in form and duly authorised.  I dismiss the appeal against them.  
17.	Mr Afsar’s failure to comply with the notices continued between 28 October 2006 and 24 November 2006, so that in my judgment the Commissioners were justified in imposing further penalties under section 97AA(1)(b).  By section 97AA(1)(b) of the TMA, the Commissioners are entitled to impose a daily penalty for continued failure to comply with a section 19A notice “not exceeding the relevant amount [£30] for each day on which the failure continues after the day on which the penalty [under section 97AA(1)(a)] was imposed”.  I am satisfied that the penalty of £5 per day which was notified was reasonable and proportionate in all the circumstances.  I therefore also dismiss the appeal against the penalties imposed under section 97AA(1)(b).

DAVID DEMACK
SPECIAL COMMISSIONER
Release Date: 12 November 2007

SC/3068/2007