![UT/2022/000131 - [2025] UKUT 00063 (TCC)](https://backend.juristeca.com/files/emisores/logo_ICfrj4g.png){kind=logo}
The Background
The Background
On 11 January 2017, HMRC opened an enquiry Mr Rafferty’s tax return for the year 2014/15 under section 9A of the Taxes Management Act 1970 (“TMA”).
On 12 May 2017 HMRC issued a notice requesting information including all bank statements for the tax year 2014/15 under Schedule 36 of the Finance Act 2008. On 20 June 2017 HMRC charged an initial penalty of £300 for failure to comply with the 12 May 2017 notice. Some bank information and a summary of interest received was sent on behalf of Mr Rafferty. HMRC issued daily penalties on 24 August 2017 for continuing to fail to comply with the 12 May 2017 notice, however £620 daily penalties were subsequently withdrawn following various explanations given by Mr Rafferty.
On 22 June 2018, HMRC issued a notice under Schedule 36, Finance Act 2008 requiring Mr Rafferty to provide copies of bank statements covering the period from 1 January 2012 to 1 February 2017 which had not previously been provided. As this information was not provided by the due date, on 4 September 2018, HMRC issued a penalty under Schedule 24 Finance Act 2008. Following a review, the period covered by the Schedule 36 notice was limited to the period commencing on 22 June 2012, but in all other respects, the review upheld HMRC’s decision (including the penalty). Mr Rafferty appealed against information notice and the penalty, and applied to the FTT for a direction that a closure notice be issued.
The appeal in respect of the Schedule 36 notices was heard by the FTT on 21 January 2020. The hearing was adjourned to allow Mr Rafferty additional time to comply with the Schedule 36 notices. Subject to this compliance, HMRC was directed to advise the FTT by 21 April 2020 (subsequently extended to 21 May 2020) whether a closure notice for 2014/15 had been issued. Most (but not all) of the outstanding information was provided to HMRC by 20 February 2020.
On 4 June 2020, HMRC issued a closure notice for the enquiry into the 2014/15 tax year for £5864.68. Discovery assessments were also issued for the years 2001/2002 to 2013/14, and for 2015/16 to 2016/17.
On 4 June 2020, penalty notices were issued for the years 2001/02 and 2016/17 on the basis that Mr Rafferty’s behaviour was deliberate.
The total amount of tax assessed by the closure notice and discovery assessments was £135,141.57. The total amount of penalties was £31,319.54.
Mr Rafferty’s appeal was heard by the FTT on 24 February 2022, and a decision notice, dismissing the appeal, was released on 10 May 2022.
Permission to appeal was refused by the FTT on 12 October 2022.
Mr Rafferty renewed his application before the Upper Tribunal. The grounds of appeal as extracted by the Upper Tribunal from the application documents submitted can be summarised as follows:
procedural irregularity in relation to the FTT’s refusal to give permission to appeal, namely that the judge who refused permission to appeal on 12 October 2022 was the same who presided at the substantive hearing of the appeal, which does not meet the requirement for a review of an original decision to be heard by an independent judge;
that the FTT (like HMRC) failed to recognise that Mr Rafferty was separated from his wife in the period 2002 to 2016 so HMRC had used the incorrect Office for National Statistics figures when calculating the average family expenditure and his outgoings - he did not live with his wife and family during the period 2002 to 2016;
that there was a procedural irregularity because HMRC relied on a document produced at the hearing in February 2022 after a 25 minute delay (see para [2] of the decision). This was relied on to Mr Rafferty’s disadvantage without him knowing its content in advance and being unable to prepare and submit a rebuttal or defence. This new document held important points that would have advantaged Mr Rafferty;
the FTT erred at [10], [161], [162] and [215] of the Decision because HMRC admitted that the benefits and income were received by Mr Rafferty’s family but did not give credit against the further assessments. The findings of the FTT at [161] and [162] of the Decision were contradicted by that at [10]; and
the FTT erred at [45] of the Decision because it took into account Mr Rafferty’s failure to meet HMRC on 17 February 2020 but he had attended the 21 February 2022 hearing before the FTT and HMRC had the opportunity to cross examine him but they chose not to. It was incorrect for HMRC to submit they asked for a meeting with him as he had been unable to attend the Tribunal hearing.
Judge Jones was satisfied that it is arguable that the FTT had erred in law in making its decision but not for all the reasons submitted by Mr Rafferty. Judge Jones granted permission in respect of the ground set out in paragraph [12(b)], but refused permission in respect of the other grounds of appeal (whilst also recording that “if it is right that HMRC did not cross examine the Applicant at the hearing then he may renew [the ground of appeal set out at [12(e)] above]” – emphasis added). However, Judge Jones granted permission to appeal on two additional grounds which were not set out in Mr Rafferty’s application (see below).
Of the original grounds of appeal, Mr Rafferty was granted permission to appeal on solely the following ground in respect of the matters raised at [12(b)] above:
that the FTT erred in law because it: (a) failed to take into account relevant evidence, (b) failed to make a decision on a fact in issue, and (c) failed to give sufficient reasons for its decision (Ground 1).