.png)
.png)
The court considers an appeal against a self-assessment surcharge in Thompson v Minzly.
A TAXPAYER PAID his tax for 1998-99 on 29 February 2000. The Inland Revenue issued a surcharge notice against which the taxpayer appealed to the General Commissioners. The Commissioners accepted the appeal and the Inland Revenue took the matter to the High Court. In the High Court the judge found that the legislation meant that the tax had to be paid by midnight on the 28th day after the due date in order to avoid a surcharge, and the appeal by the Inland Revenue succeeded.
The court considers an appeal against a self-assessment surcharge in Thompson v Minzly.
A TAXPAYER PAID his tax for 1998-99 on 29 February 2000. The Inland Revenue issued a surcharge notice against which the taxpayer appealed to the General Commissioners. The Commissioners accepted the appeal and the Inland Revenue took the matter to the High Court. In the High Court the judge found that the legislation meant that the tax had to be paid by midnight on the 28th day after the due date in order to avoid a surcharge, and the appeal by the Inland Revenue succeeded.
The background and facts
The taxpayer, Mr Nathan Minzly, submitted his 1998-99 tax return on 31 January 2000. Mr Minzly had accepted responsibility to calculate the tax payable which amounted to £77,792. Eventually this amount was paid in full on 29 February 2000 by cheque.
On 5 May 2000 a surcharge notice of £3,889.60 was issued, against which the taxpayer appealed.
At the meeting of the General Commissioners for the Division of Wokingham it was contended on behalf of the taxpayer that section 59C(2), Taxes Management Act 1970 states that: 'Where any of the tax remains unpaid on the date following the expiry of 28 days from the due date, the taxpayer shall be liable to a surcharge equal to 5 per cent of the unpaid tax'.
It therefore followed that tax must not be unpaid on the day following 28 February. However, as the amount due had been paid on 29 February, it was not left unpaid on the day following 28 days after the due date. It therefore followed that the surcharge had been incurred by the tax having been paid during the day following 28 days after the due date.
The Inland Revenue contended that at the point on which 28 February expired, namely midnight, any tax unpaid fell liable to a surcharge under section 59C(2). It was therefore sufficient that tax remained unpaid by the taxpayer at a particular point in time on 29 February 2000, which it did.
The contentions of the taxpayer were accepted by the Commissioners, who found in his favour, and the Inland Revenue appealed to the High Court.
(Sam Grodzinsky for the Revenue; Julian Ghosh for the taxpayer.)
The High Court judgment
The matter came before Mr Justice Ferris who briefly reviewed the statutory legislation and observed that he had been told that this point had come before various bodies of Commissioners on a number of occasions. Some Commissioners had decided it in favour of the Revenue. Others had taken the view which found favour with the Wokingham Commissioners. The Inland Revenue was seeking, by means of the current appeal, to establish an authoritative interpretation.
The judge observed that in approaching section 59C(2) it was essential, in his view, to bear in mind that it could only come into play when tax had remained unpaid during at least a period of 28 days from the due date. It seemed to him that the enquiry, which the subsection required to be made, was whether this state of affairs remained in existence on the day after that period had expired. That being the enquiry, he took the view that it had to be answered in respect of a particular point of time, not in respect of the whole of any additional period. In his view, that point of time, as a matter of language, was at any time on 29 February 2000. He accepted, of course, that when one is addressing the continuance or otherwise of a state of affairs which has existed during a previous period, that means in practice that one must look to the first moment of the day in question.
Mr Justice Ferris stated that the decision of the Commissioners represented a misuse of language. Tax was unpaid on the 29th day because it remained unpaid during the earlier part of that day. The fact that it was paid later on in the day does not alter that fact.
The decision
The appeal by the Inland Revenue was allowed.
Commentary by John T Newth FCA, FTII, FIIT, ATT
The necessity for this appeal is an illustration of the complexity of self-assessment legislation and practice and to some extent the poor drafting of some of the legislation. It was instructive that this very point had come before various bodies of Commissioners, some of whom had decided in favour of the Revenue and some in favour of the relevant taxpayer.
What the original legislation sought to say has been clarified now but, as cases taken before the courts regarding self-assessment issues continue to occur, there are undoubtedly other points that are still outstanding. It needed someone with the courage of Robert Maas to unfurl the nonsense regarding estimated and provisional figures and the rejection of self-assessment returns on that basis. Other similar issues remain to be clarified and so, sadly, case law regarding self assessment is bound to grow.
One good thing that has happened is that the Public Accounts Committee of the House of Commons has stated that self-assessment law and practice is far too complicated. Practitioners and taxpayers have known this for several years, but perhaps this message is now getting through to the Government.
