Spc00708

SELF ASSESSMENT – amendment to self assessment return – delivered on time? – question of fact – yes - appeal allowed.

THE SPECIAL COMMISSIONERS

Mr M RANSOM
		Appellant

-and-

             HER MAJESTY’S COMMISSIONERS OF
             REVENUE AND CUSTOMS
			Respondents

Commissioner: Richard Barlow 

					 	

Sitting in public in London on 2nd to 5th June 2008.

Andrew Walker of counsel instructed by Messrs Speechly Bircham, solicitors, for the Appellant.

Ms June Kennerley, Inspector of Taxes for HM Revenue and Customs. 

© CROWN COPYRIGHT 2008

DECISION

1.	The issue in this appeal is whether or not an amendment to the appellant’s tax return for the year ending 5 April 2001 was made not more than twelve months after 31 January 2002 so as to be an effective amendment under section 9ZA of the Taxes Management Act 1970, as amended.

2.	The appellant had entered into a film partnership during the year ending 5 April 2002 and had made a substantial trading loss which he intended to carry back and set off against a substantial capital gain he had made upon the exercise of a number of share options during the year ending 5 April 2001.  On 12 December 2002 the Court of Appeal’s judgement was released in the case of Mansworth -v- Jelley [2002] EWCA Civ 1829 and the appellant’s advisors realised that it would no longer be necessary to rely upon the trading loss to offset the gain.  On the other hand that loss might well be capable of being used to the appellant’s advantage in later years and so they advised him to amend his return in order to carry it forward from the year ending 5 April 2002 which necessitated the amendment of the return for the year ending 5 April 2001 to reverse the carry back.  

3.	If the appellant did effectively amend the 5 April 2001 return, it is agreed that he will save a substantial amount of tax in respect of the year ending 5 April 2006 by offsetting the film partnership loss which will, if that amendment was effective, still be available and so this appeal is technically an appeal against the respondents’ amendment to the appellant’s 2005/06 self-assessment return by a closure notice dated 21 March 2007. 

4.	It was agreed between the parties that an amendment to the return would comply with section 9ZA in the circumstances of this case if it was delivered to any office of the respondents at or before midnight on 31 January 2003, whether or not it came physically into the hands of an officer by that time and indeed whether or not it was delivered to the office that would deal with it.  It was agreed that the sole issue I have to decide is the question of fact whether or not the amendment was so delivered by that time.  It is agreed that the legal burden of proof lies upon the appellant and the standard of proof is the balance of probabilities.

5.	Briefly, the appellant’s case is that the amendment was delivered by hand by Mr Kenneth Wilson, a chartered accountant then of Anderson Charnley Ltd, to the respondents’ Woking Enquiry Office on the evening of 31 January 2003 after that office closed but before midnight on that day.  It is the respondents’ case that the document cannot have been delivered by that time and was in fact posted to their North East Metropolitan Area Office, in Middlesbrough, arriving there on 7 February 2003.      

6.	I should record that a separate point taken by the respondents that the appellant could not “re-open the 00/01 year, several years after the self-assessment became final simply by entering a different number brought forward onto a return for a later year” was abandoned. 

The appellant’s evidence.

7.	The following witnesses gave evidence for the appellant: Mr Kenneth Wilson, chartered accountant employed by Anderson Charnley at the material time, Mr Quam Fatuga, tax manager of Anderson Charnley at the material time, Mr Stephen Clark, chartered tax advisor of Anderson Charnley at the material time and currently an advisor to Mr Ransom, Mr Christopher Loynes the major shareholder in Anderson Charnley at the material time and Ms Avril Millar who holds FSA authorisation and was the chief executive officer of Anderson Charnley at the material time. 

8.	Anderson Charnley is not a firm of accountants but it looked after the tax affairs of clients and managed their wealth in general and, as is obvious from the qualifications held by the witnesses, it employed the relevant professionals.  The witnesses satisfied me that there was a general understanding within Anderson Charnley about the significance of the Mansworth -v- Jelley case and about the potential need to amend clients’ tax returns as a consequence of it on behalf of several clients and also that there was a very good understanding of the need to present documents to the Inland Revenue timeously. 

9.	Mr Wilson did not look after Mr Ransom’s affairs generally but he was asked by Mr Fatuga to deal with an amendment to Mr Ransom’s return after the Mansworth -v- Jelley judgement was released because Mr Wilson dealt with the more technical tax matters at that time.  Mr Wilson was dealing with several tax returns or amendments that had to be delivered by 31 January 2003.

10.	He stated in evidence that he had habitually adopted the practice of hand delivering returns or amendments on 31 January to the Woking office because from a day or two before that date he regarded it as being too late safely to rely upon the postal service to deliver them on time.  In 2001 he had delivered some returns or amendments by hand on the 31 January but there had been some problems because the tax offices to which they were addressed had stamped them on receipt at those offices rather than acknowledging receipt at Woking on 31 January.  Those problems were resolved but, because they had arisen, when he hand delivered returns on 31 January 2002 he took with him a list of the returns he was submitting and queued up to have the list stamped as an acknowledgement of what had been delivered.  A copy of that stamped list was produced.  Mr Wilson’s recollection was that he was still queuing until after midnight though evidence from the respondents satisfies me that he had not hand delivered those documents as late as that.  Mr Wilson said that he may not have got home until after midnight and that was the only explanation he offered for what I find to be an incorrect recollection about the time on that occasion.  I am, however, satisfied that the delivery was accepted after normal closing hours and indeed the respondents agree that the office was kept open late on that occasion.   

11.	Mr Wilson’s evidence was that on 31 January 2003 he intended to do the same as in the previous year.  He left the office in Bagshot to drive to Woking at about 8pm or 8.30pm and the journey should take about 30 minutes.  

12.	At this point I should refer to two affidavits Mr Wilson made.  These were sworn on 2 December 2004 and 10 June 2005.  In the first affidavit Mr Wilson stated that he had, to the best of his knowledge and belief, hand delivered the documents to the Woking office “after 5.30pm on the evening of 31 January 2003”.  In the second affidavit he said he had left Bagshot at approximately 8pm and arrived at Woking at approximately 8.30pm.

13.	 It was put to Mr Wilson that the times referred to had become later in the affidavits and again in his witness statement, which stood as his evidence in chief and which he confirmed when cross examined, because he was covering up the fact that he had not completed the amendment to the return in time and had posted it later.  He denied that and his evidence that other documents were delivered and accepted to have been delivered on 31 January 2003 was not contradicted so that it is the respondents’ case that Mr Ransom’s amendment alone was dealt with late and posted too late.

14.	Mr Wilson said that his recollection was that it had been a fine night.  It was put to him that internet searches had revealed that there had been snowfall that day and schools not far from Woking had been closed.  In fact the internet searches are ambiguous as to which day was affected and the fact that other returns were undoubtedly hand delivered outside ordinary working hours to Woking that day refutes any suggestion that Mr Wilson could not have got to Woking and I am not satisfied that his recollection about the weather has been proved to be incorrect.

15.	On arrival at the Woking office Mr Wilson found that only a security guard was on duty.  He said the guard let him in and was unwilling to certify the list he had brought.  The guard pointed to a basket which had been left out for late delivered documents and Mr Wilson placed in it the documents he had brought.  His evidence was that those documents included the amendments to Mr Ransom’s returns.  He said he had checked before getting out of his car that he had the correct number of envelopes to comply with the list he had brought and which he had hoped would be stamped to confirm receipt.  A minor discrepancy between Mr Wilson’s recollection of the size and shape of the basket and the evidence about that from Mr Charles, one of the respondents’ witnesses, is of no significance in my opinion, not least because Mr Wilson did indeed place at least some documents in that basket on that day whatever its size and shape.

16.	The list which Mr Wilson took with him to Woking, intending to have it stamped to confirm receipt of the documents, has not been found.  He sated that he thought he had left it in a miscellaneous file and it appears that after he left Anderson Charnley that file has gone missing. 

17.	On 16 August 2003 the Inland Revenue wrote to Anderson Charnley about the amendment to Mr Ransom’s return.  In that letter they said “We take the view that an amendment to a return is made when it has reached the Revenue’s hands and the Revenue has sight of it.  There are no indications that your letter reached the Revenue within 12 months after the filing date for the return – it was received by the Revenue on 7 February 2003 – and the amendment is, therefore, out of time and is not valid”.  

18.	Mr Wilson replied by an undated letter received by the Inland Revenue by 1 September 2003 (when it was date stamped).  That reply included the following:

“We note the comment concerning the view taken by the Revenue concerning the time an amendment is made to a [self-assessment] return.  We find it difficult to understand how such a view could be taken since the relevant legislation makes it clear that amendments are made by notice to an officer of the Board.  The only limitation on the making of an amendment is that it may not be made more than twelve months after the filing date, and there is certainly no requirement that such a notice may be regarded as not made if not received by an officer of the Board within a particular timescale.  Our client’s notice was certainly made not more than twelve months after the filing date, thus we can not accept that it was not validly made within the requirements of the relevant legislation”.

The letter then goes on to make a point about a difference in wording between section 8 of the Taxes Management Act and section 9ZA.   Section 8 appears to require a return to be made to the same officer who gave notice that it was required whereas section 9ZA appears to require notice to be given to any officer of the Board. 

19.	It was put to Mr Wilson that, had he actually delivered the amended return on time as he claims, then he would have replied in that letter that he had done so rather than to claim, as he appears to do, that all would be well as long as the amendment had been completed in his office before the due date even if it had not by then been delivered to the Inland Revenue.

20.	Mr Wilson said that he had taken the letter from the Inland Revenue to be asserting that it would not be enough to deliver the letter to the office and that it would have had to actually come into the hands of an officer by the due time.  I certainly agree that the words “and the Revenue has sight of it” could convey that impression though Mr Wilson was also wrong to assert that timeous delivery was unnecessary provided the amendment had by then been “made” in the sense implied in his letter.  

21.	Whilst I agree that there is something in the respondents’ point about this aspect of the evidence I do not agree that the matter is as clear as they assert.

22.	My general impression of Mr Wilson as I observed him to be while giving evidence was that he is a careful, even a rather pedantic, man where his work is concerned and that he has a good deal of knowledge of tax matters generally and a good attention to detail.

23.	Mr Wilson’s evidence was corroborated in some material particulars by other witnesses for the appellant.

24.	Mr Loynes worked mostly in the London office but lived near the Bagshot office and habitually called in on some occasions on his way home.  He recalled that he had reminded Mr Wilson about the need to submit the returns and amended return in the time leading up to the deadline for doing so as these were important matters for important clients.  He recalled seeing Mr Wilson on the 31 January 2003 and saw him leave with envelopes.  They had a short conversation in which Mr Wilson confirmed that the envelopes were the returns and amendments and that he was going to Woking.  When it was reported to him, some time after the event, that the Inland Revenue were disputing that the amendment had been made in time he was involved in searching for the missing list but could not find it.

25.	Ms Millar also gave evidence that she had been at Bagshot on 31 January 2003 and had discussed with Mr Wilson, in the days leading up to that day, the need to make the returns and amendments and had kept herself abreast of progress.  She recalled seeing him leave the office with a quantity of envelopes at about 8.30pm “with his sandwich box on top as always.”  The spontaneous and unconsidered addition of that apparently irrelevant detail gives credibility to her recollection in my opinion.

26.	Mr Fatuga does not claim to have any specific recollection about 31 January 2003 but in evidence he said that he had known that Mr Wilson intended to hand deliver the amendment.  He was questioned about telephone conversations he had with Mr Philip of the Inland Revenue in November 2003 after the issues in this case were raised.  

27.	On 12 November 2003 he is said to have told Mr Philip that the fault for the delay rested with the Post Office.  He told me that he had no recollection of saying this but he had taken the assertion by the Inland Revenue (that the document did not arrive until 7 February) to be correct.  He thought there was no problem anyway because at that time he held the view that Mr Ransom’s tax for the relevant year was still deemed to be under enquiry and that that would mean that the amendment was not required to be made by 31 January anyway.  On 17 November he said that there was no evidence that the amendment had been faxed.  That is of course correct.    

28.	In my view Mr Fatuga was not in a position to assert that the amendment had been hand delivered and, given that the covering letter that accompanied it was on file and could be taken to suggest that it had been posted on 31 January and, if so, could not therefore have been received on that date; it is understandable that Mr Fatuga made the remark that is attributed to him.  I do not regard that remark as proving that the amendment had been posted.

29.	Mr Clark’s evidence was of limited relevance as he was not involved with the events of 31 January 2003.  His evidence was concerned mainly with the technical aspects of Mr Ransom’s tax affairs which are not now relevant as it is agreed that the only issue is the factual issue about the delivery of the amendment.  He did agree that he had said to Mr Atkinson of the Inland Revenue, in a telephone call on 11 January 2006, that the amendment had not been made on 31 January 2003 but he explained that by saying that he had only seen the file; in which the covering letter certainly gives the impression that the amendment was posted.

30.	I find that the appellants have at least established a prima facie case by apparently credible evidence that the document was delivered to the Woking office before midnight on 31 January 2003.

The respondents’ evidence.

31.	The respondents’ evidence consists of detailed evidence about how incoming post, including hand delivered documents, was dealt with at the material time and evidence tending to suggest that Anderson Charnley accepted that the amendment was posted (some of the latter having already been referred to).

32.	 The respondents’ witnesses were Mr Christopher Charles, manager of the Woking enquiry office, Mrs Michelle Somai manager of the Woking Post Room at the relevant time, Mrs Margaret Davis officer at the National Distribution Unit Cumbernauld, Mrs Lesley Wilson manager of the Post Room at the North East Metropolitan Area (NEMA) based in Middlesbrough at the relevant time, Mrs Elsie McCann currently an officer of the Local Compliance Unit at Durham, Mr Peter Atkinson inspector of taxes based at NEMA at the relevant time and Mrs Nadine Newman an officer based at the Leeds Appeal Unit.

33.	Mr Charles stated that the Woking office had made special arrangements about receiving documents on both 31 January 2002 and 31 January 2003.  The office stayed open late and returns or other documents were accepted by the enquiry team staff.  In 2002 the last customer was seen at 7.58pm and in 2003 the last customer was seen at 8.10pm.  The records show the times when customers with “sit down appointments” were seen.  Any other customers in the building who were only delivering documents might have been dealt with slightly later than those times but that would only have been for a few minutes after the last appointment and the office was due to close at 8pm.  Mr Charles was certain that the office was not open until midnight on 31 January 2002 and that it had closed shortly after 8pm in both years.  I accept that evidence as Mr Charles would be bound to recall the times of operation on those dates which were exceptions to the usual times and I can see no basis for doubting that his recollection is correct.  

34.	In 2003 31 January fell on a Friday and Mr Charles went back to the office at about 7am on Saturday 1 February to empty the basket that had been left out for deliveries after the office closed the night before.  He did not date stamp the documents from the basket but he left them together in a plastic container marked to identify its contents as the documents received on 31 January.  The basket was left in the foyer and he carried out the same exercise on Sunday 2 February so that on Monday 3 February the staff were able to identify which documents were delivered on 31 January and which were delivered on 1 February and 2 February.          

35.	Mr Charles was not responsible for the actual stamping of documents but he stated that the correct procedure was that any documents, other than returns, handed in to the enquiry office during opening hours should be date stamped with a stamp with the words “Wey Valley Tax Enquiry Centre” and a date.  Returns should not be date stamped with that stamp but should be sent to the logging team and they would stamp them with the words “Logged Wey Valley” and a date.  

36.	Mrs Somai said that for documents delivered by post during office hours and those handed in at the office outside normal hours (i.e. those left in the basket) a different procedure should have been adopted.  They should have gone to the post room and should have been stamped there with a date stamp and if they were returns they should then have been sent to the logging team and stamped again.  In both cases the date was the date of physical receipt of the documents so that documents placed in the basket between 8pm, or shortly thereafter, on 31 January and about 7am on 1 February 2003 should have been stamped 31 January with the post room stamp, unless they were returns, in which case they should have been stamped with that date stamp and with the logging stamp as well.  Logging involves recording the returns onto the computer but because of the volume of returns made at that time of year the returns are stamped on the date of receipt even though the logging procedure may not be completed until some time later.

37.	The vital document in this case is the amendment to the return, as already explained, and it only has one stamp on it which is on the covering letter and reads “Received NEMA 7 Feb 2003”.  That document consists, not of a full return, but rather of pages 8, CG2, CG3 and CG8 which were those that Mr Wilson needed to amend to make the amendment that he needed to make by 31 January 2003.  Mr Charles said that he doubted if that document would have been stamped with the logging stamp because it would not have been regarded as a return and certainly I was shown examples of returns where the logging stamp had been applied to the first page of the return itself which was absent from the amendment.    

38.	On the other hand, the correct procedure would have been that the document should have been stamped with the post room date stamp if it had been received by hand in the way Mr Wilson has described.

39.	Three returns sent to the Inland Revenue by Anderson Charnley were shown to Mr Charles.  Two are addressed to a Glasgow office and one to NEMA and all three are stamped as logged at Wey Valley (i.e. Woking) on 31 January 2003.  It is the appellant’s case that these were three of those delivered by Mr Wilson and left in the basket on 31 January 2003.  He gave what I find to be convincing circumstantial details about two of them which satisfy me that his recollection is correct in that respect.  One was from a neighbour of his and he recalled collecting it and another was from a client who always gave the necessary details late and so the return had to be hand delivered.

40.	The significance of those three returns is that, if the procedure described by Mr Charles had been followed, they should have been date stamped at Woking as well as being stamped with the logging stamp because only the returns handed in during ordinary office hours should have gone straight to the logging team, those left in the basket should have gone to the post room first and should have been stamped there and also by the logging team.   

41.	It seems entirely possible that the post room staff could have sent those returns straight to the logging team without first stamping them, even if that was not in accordance with the correct procedure.  Indeed that seems to be the necessary conclusion from the fact that they are only stamped with the logging stamp coupled with my finding that they were delivered by hand.

42.	Mr Charles said in evidence in chief that he thought those three returns had been posted to Woking and sent to the logging team direct but that does not accord with the evidence of Mrs Somai because she said all posted returns came to the post room and were stamped before going to the logging team.  I also regard it as likely that if Anderson Charnley were posting documents clearly addressed to Glasgow and NEMA they would not have posted them to Woking.   

43.	If the Woking Office’s procedure as described to me had been followed correctly in respect of those three returns the stamps on them would only be consistent with their having been hand delivered during office opening hours but as I have found that Mr Wilson’s evidence that he left them in the basket is correct I conclude that in respect of those three returns the correct procedure was not followed. 

44.	However, the vital amendment document is not date stamped at Woking at all which, if Mr Wilson’s evidence is correct, means that the post room failed to stamp it at all and merely forwarded it.  What happened in respect of the three returns just referred to is not conclusive about what may be the case in respect of the amendment.  

45.	According to the procedure adopted at Woking, forwarding was done by attaching a stencil addressed to the correct office.  

46.	Documents for forwarding to other offices were collected by TNT Parcel service and taken by road to Cumbernauld where they would be sorted without further date stamping and sent on to the relevant office.  Evidence given about the procedures at Cumbernauld by Mrs Davis does not take the matter much further.  If the amendment was hand delivered to Woking it could not have been forwarded to Cumbernauld until the night of Monday 3 February but the evidence is that Cumbernauld was managing to sort and send out all its post on the day it arrived so the amendment could have been sent out again on Tuesday 4 February again being collected by TNT.  Mrs Davis said that all post to English destinations then went to Lount which I understand is near Ashby-de-la-Zouch in Leicestershire.  It might therefore be possible that it could be delivered to NEMA, yet again by TNT overnight, arriving on Wednesday 5 February but none of the witnesses knew what TNT’s target for delivery was and it seems more likely that by the time a document arrived at Lount overnight from Cumbernauld it would not be sorted and sent out again until the next night so that 6 February would be the earliest a document hand delivered to Woking on 31 January 2003 could have arrived at NEMA.    

47.	I do not regard the fact that the document could have arrived on 6 February as meaning it must have arrived on that date and so the fact that the NEMA date stamp is for receipt on 7 February is not sufficient evidence that it could not have been hand delivered to Woking.

48.	Mrs Wilson gave evidence about the post room procedures at NEMA but, except to confirm that the amendment was stamped there on 7 February, I find that her evidence did not carry the matter any further.  Mrs McCann had worked at another address formerly used by NEMA and her evidence was to the effect that Mr Wilson of Anderson Charnley had sometimes addressed documents to an address after he had been informed that a different office was now dealing with the matter but I attach no importance to that because, whether timeously or non-timeously delivered to the Inland Revenue, the relevant document in issue in this case was correctly addressed.  

49.	Mrs Newham simply produced some of the documents.   

50.	Mr Atkinson dealt with some technical issues that are no longer relevant and the telephone conversation with Mr Clark, as to which see paragraph 29 above.

Conclusions

51.	The appellants have produced apparently credible evidence that the amendment was hand delivered and the respondents have produced evidence that, if their procedures were correctly followed, the document must have been posted to NEMA but that, as it only arrived on 7 February, it must have been posted after 31 January so that no issue arises as to whether posting by first class post on 30 January would be enough to satisfy the statutory time limit.  

52.	There is some evidence to suggest that other documents were not dealt with correctly by the Woking office at the time.

53.	Had the matter to be decided only on a strict analysis of the evidence I would have found in favour of the appellant on a balance of probabilities.  I also had the advantage of Mr Wilson’s evidence and of observing him in the witness box and under cross-examination and I find that evidence to be convincing.  I am satisfied that he did deliver the document in time as he asserts and so I find in favour of the appellant.   

54.	I will allow the appeal subject only to allowing the parties to revert to the tribunal if they are unable to agree the consequences of my finding on the only issue I was asked to decide.  The parties did say that those consequences are agreed but there seemed to be some lingering uncertainty about that so I will leave it open to either party to apply to the tribunal, within three months of the release of this direction, for a resumed hearing to be convened.

Richard Barlow
Special Commissioner

Release date: 29 August 2008

SC/3197/2007