HM Revenue & Customs v Sokoya

This is an appeal from the decision of Dr John Avery Jones, CBE, a Special Commissioner, dated 26 July 2007. The appellant is Mr Adesina Olusegum Sokoya and he appeals against a section 19A notice requiring him to produce to the Revenue certain categories of document, and applies for closure of the Revenue’s inquiries into that return. The Special Commissioner found the following facts:

The appellant appealed against the notice on 7 August 2006, electing for it to be heard by the Special Commissioners. The letter stated that the information and documents requested were superfluous for the Revenue’s declared intent. He purported to appeal against the notice to inquire into the tax return which, after some correspondence, the Revenue and the Special Commissioners have taken to be a request to close the inquiry.

The relevant provisions of the Taxes Management Act 1970 are sections 9(a)(1) and (2), section 19A(1), (2), (6), (9) and (11), section 28(A), (1) and (2), section 56(B), (1) and (2). These are set out in appendix (1) to this judgment.

The Special Commissioner, having considered the submissions of both parties, came, at paragraph 6 of his decision, to this conclusion:

“The question is whether it appears to me that the production of the document or the furnishing of the accounts or particulars was reasonably required by the officer for the purpose of determining whether and, if so, the extent to which the return is incorrect or incomplete. Clearly the enquiry need not be limited to the entries in a return because the officer can require information to determine whether the return is incomplete. I can see nothing unreasonable in any of the questions. The Appellant says that he has ordered his affairs so as not to pay tax but has not said how. I wondered if, for example, it was because he was not domiciled, but no such claim is made in return. Since his income cannot support his expenditure it seems entirely reasonable to me that the Revenue should [seek] to check his taxable income. The questions are reasonably required for this purpose.”

On the appeal, Mr Sokoya presented his arguments himself. The Revenue has been represented by Ms Sen Gupta. The grounds of appeal are, in essence, firstly, that the section 19A notice was not reasonably required to enable the Revenue to inquire into this particular return. A second ground of appeal was that under section 28(A) the Revenue should have closed the inquiry. It is accepted on both sides that this ground of appeal stands or falls with the first ground.

Mr Sokoya’s return was, as the Special Commissioner explained, principally directed to disclosing income from employment with the company which I have mentioned. However, the return was in standard form and Mr Sokoya has struck through the boxes which relate to interest, to dividends, to pensions, life insurance policies, and so on. Mr Sokoya’s main argument was that his return for these purposes, and properly understood, was restricted to the information which he had given in relation to his employment, and did not include the other entries in his tax return, which had, by implication, made a nil return.

Ms Sen Gupta’s argument was twofold. Firstly, she said there was no jurisdiction to hear this appeal, having regard to the provisions of section 19A (11) of the 1970 Act. Secondly, that in any case the decision of the Special Commissioner to confirm the section 19A notice was correct. As to the first point, the language of subsection 11 could have been clearer. I expressed doubt in course of argument that the effect of section 19A(11) was definitely to preclude an appeal against a finding such as that made by the Special Commissioner in this case. The reference made in section 19A(11) to section 56(B) is somewhat puzzling and I expressed a view, to put it no higher than that, that it might be thought to be a reference to the distinction which is sometimes made procedurally, between a final and interim, or interlocutory, decision. A glance at the rules made pursuant to section 56(B) over the short adjournment has shown that there is a distinction made in those rules between final decisions and decisions in principle.

Had the purpose of subsection 11 been to prevent further appeals, it would have been very easy for the provision to be drafted in those terms. Ms Sengupta was not aware of any other provision where an embargo on appeals had been expressed in words of this kind. By necessity, I have not heard full argument on this point on this appeal. It could be an important question in other appeals. Accordingly, I do not express a concluded view as to whether the effect of subsection 11 was to make an appeal to the High Court from the Special Commissioners beyond the jurisdiction of the High Court.

However, when one comes to the substance of the appeal, I have no doubt that the Special Commissioner was correct to confirm the section 19A notice. I reject Mr Sokoya’s contention that the Revenue can only inquire into those aspects of his return where he has made positive entries. His nil returns under the other aspects of his return are equally proper subject matter for the Revenue to investigate. There are two very strong reasons why this should be so. Section 19A(2)(a), as the Special Commissioner noticed, is specific in allowing documents to be produced to determine whether a return is incomplete or incorrect. A construction of that provision which limited the power to require production to documents which went to show whether individual positive entries were correct would give no real meaning to the word “incomplete”. Secondly, in substance, Mr Sokoya is declaring in his return that he has no income under any other head. It would be absurd, to my mind, if such a declaration were to shield him from inquiries when a statement that he had received a positive sum, however small, would not. That is sufficient to dispose of the appeal on both grounds as it deals with the heart of Mr Sokoya’s argument.

Mr Sokoya’s contention was that the documents were not sufficiently closely related to checking his income from employment in order to satisfy the requirement of reasonableness. Once it is clear that the inquiry is legitimate in relation to all aspects of the return of income, that objection falls away.

Mr Sokoya attempted to support his appeal by reference to articles 6 and 8 of the European Convention on Human Rights, made part of our law by the Human Rights Act 1998. Insofar as he places reliance on article 6, I have had my attention drawn to the decision of the European Court of Human Rights in Ferrazzini v Italy, application number 44759/98, dated 12 July 2001. Ms Sen Gupta submitted that that case decided that the administration of direct tax obligations does not fall under the purview of article 6. That is a highly persuasive authority to that effect, and I agree.

I would add that Mr Sokoya’s complaint under article 6 lacks any substance at all. His complaint was that no notice of the material relied on by the Revenue to support its belief in his under-declaration was given to him in adequate time for him to deal with it before the Special Commissioners. So far as that is concerned, and having reviewed the correspondence, the Revenue has gone out of its way to provide Mr Sokoya with advance notice of the basis for its belief in his under-declaration. I would, in addition, express the tentative view that the inquiry as to reasonableness called for by section 19A is at least primarily directed to showing whether the documents are likely to show whether the return is accurate. The section is not really concerned with whether the Revenue have reasonable grounds for their belief that the information is inaccurate. The purpose of the provision is to enable to Revenue to test self-assessed returns for their accuracy, whether or not they have reasonable grounds for believing that they are not.

So far as article 8 is concerned, Mr Sokoya relied on the intrusion into his privacy that compliance with the section 19 notice would entail. Article 8 expressly recognises the need in a democratic society to preserve the economy and wellbeing of the country. Regrettable though it might seem, tax collection comes fully within that exception. I therefore see no reason why a valid section 19A notice should be rendered any less so in this case by the provisions of article 8 of the convention.

It follows that both grounds of appeal fail and the appeal must therefore be dismissed.