Aaron Armah v The Commissioners for HMRC

This is an appeal brought by the Appellant, Mr Aaron Armah, against the Respondents’ decision to issue the following Closure Notices pursuant to section 28A(1B) and (2) of the Taxes Management Act 1970 (“TMA 1970”):

The Closure Notices relate to claims for Gift Aid relief in the Appellant’s self-assessment tax returns for the years 2015/16, 2016/17 and 2017/18, which the Respondents conclude have been incorrectly claimed. The tax returns in question have therefore been amended to remove the entry for Gift Aid. The total amount under appeal is £31,717.31.

The Appellant lodged his appeal to the Tribunal against the Closure Notices on 12 January 2022. This is a late appeal, but the Respondents have indicated on paper that they do not object to the late appeal. This was confirmed by Mr Gyasi during the hearing before us.

On 18 June 2018, the Appellant filed his self-assessment tax return for the tax year 2017/18. The return included a claim for relief for Gift Aid in the sum of £40,625.00.

On 20 June 2018, the Appellant filed his self-assessment tax return for 2015/16. The return included a claim for relief for Gift Aid in the sum of £43,750.00. On the same date, the Appellant also filed his tax return for 2016/17. The return also included a claim for relief for Gift Aid in the sum of £42,500.00.

On 14 January 2019, the Respondents issued enquiry opening letters (notices of enquiry) under Section 9A of TMA 1970 to the Appellant and their tax advisor in relation to the Appellant’s tax returns for 2015/16, 2016/17, and 2017/18. The letters were issued by Mr Philip Lloyd, an officer of HMRC. He requested information and documents from the Appellant to substantiate the figures for the Appellant’s employment income, the employment expenses claimed, and the Gift Aid Relief claimed for each of the tax years in question.

No reply was received from the Appellant or their tax advisor. As a result, on 11 March 2019, the Respondents issued an Information Notice to the Appellant pursuant to Paragraph 1 of Schedule 36 to the Finance Act 2008 (“FA 2008”), again requesting the same information and documents to evidence the figures in the tax returns submitted by the Appellant.

On 2 May 2019, the Appellant emailed the Respondents with copies of their P60 for the years 2015, 2016, 2017, and 2018. However, no information or documentation was provided in relation to the employment expenses or the Gift Aid relief.

On 21 May 2019, the Respondents sent an email to the Appellant requesting further information concerning the employment expenses claimed.

On 15 August 2019, the Appellant sent an email to the Respondents, stating:

“My accountant put in the recent claims…He made a mistake on the gift aid, as I have not made the contributions that I made previously, so please make the relevant adjustments.”

On 7 October 2019, the Respondents emailed the Appellant to advise they were satisfied that the Appellant’s employment expenses were in order. The Respondents queried the years for which the Gift Aid relief had been included in error.

The Appellant responded on 11 November 2019, stating that the tax years 2015/16, 2016/17, and 2017/18 needed to be revised regarding Gift Aid.

On 12 November 2019, the Respondents emailed the Appellant asking him to confirm the amended amounts of Gift Aid for the years under appeal. On the same date, the Appellant replied to the Respondents’ email regarding the Gift Aid figures, stating: “the amounts were minimal, and can be stating (sic) as zero for those years.”

On 14 November 2019, the Respondents emailed a letter to the Appellant establishing the effect of the Gift Aid error on the tax position for each of the years under appeal. Enclosed were before and after calculations to illustrate the correct position in light of the removal of the incorrect claims for Gift Aid. On the same day, the Appellant emailed the Respondents requesting a telephone conversation regarding the Respondents’ calculations.

On 2 December 2019, the Respondents called the Appellant to discuss the calculations. The Respondents advised the Appellant that they would review the Appellant’s records to determine the correct position. The Respondents emailed the Appellant on the same day, stating that having reviewed the current position, they could confirm that the calculations for the revised tax positions were correct. The Respondents also included an explanation of how Gift Aid relief operated and advised that the incorrect inclusion of Gift Aid in the Appellant’s return had reduced his total tax liability.

Following this, on 2 December 2019, the Appellant emailed the Respondents claiming, contrary to his previous emails, that he had not submitted any returns for the years under appeal. He also stated that he was confused as to how Gift Aid could be added retrospectively.

On 20 December 2019, the Respondents emailed the Appellant with screenshots of the relevant pages from the Appellant’s tax returns for the years under appeal, showing the Appellant’s claims for relief for Gift Aid within the submitted returns. The calculations for the correct tax positions were also attached.

On 9 February 2020, the Appellant emailed the Respondents stating that his advisor had completed and submitted the tax returns for the years under appeal on his behalf and that he had not seen the screenshots as he “did not make the return”.

On 17 February 2020, the Respondents therefore wrote to the Appellant’s advisor with questions regarding the completion of the tax returns. No reply was received.

On 30 June 2020, the Respondents emailed the Appellant advising him that they did not hold an email address for his advisor and that all correspondence had been issued through post. On the same day, the Appellant replied, providing an email address for their advisor and advised that they were now based in the United States.

On 1 July 2020, the Respondents emailed the Appellant requesting confirmation that the details held by the Respondents for his advisor were correct. On the same day, the Appellant replied confirming that the details were correct.

On 13 July 2020, the Respondents emailed the Appellant’s advisor with questions regarding the completed tax returns. No reply was received from the advisor. On 8 October 2020, the Respondents again emailed the Appellant’s advisor, to follow up on their email dated 13 July 2020. Again, no reply was received.

On 20 November 2020, the Respondents issued Closure Notices for each of the years under appeal, totalling £31,717.31. The Respondents concluded that Gift Aid relief had been incorrectly claimed in the Appellant’s self-assessment tax returns for 2015/16, 2016/17 and 2017/18. Amendments were therefore made to the tax returns in question by removing the relief for Gift Aid claimed for each of those years.

On 18 December 2020, the Appellant emailed the Respondents appealing the Closure Notices. The Appellant stated they did not understand how the Respondents had arrived at their decision and that there were errors within the assessments raised (no details were provided as to those errors).

On 25 February 2021, the Respondents emailed the Appellant requesting further details regarding the Appellant’s assertion that there were errors in the assessments.

On 26 February 2021, the Appellant emailed the Respondents advising that he had been unwell and that he believed that the next step was an appeal. He reiterated that he did not understand the findings and believed that they were wrong.

On 2 March 2021, the Respondents replied to the Appellant’s appeal for the Closure Notices. It was explained to the Appellant how the incorrectly claimed Gift Aid relief had wrongly extended the basic rate bands for each year and reduced the Appellant’s overall tax position.

On 15 March 2021, the Appellant emailed the Respondents stating he did not understand how tax could be due for earlier years, when the returns had been completed in 2019.

On 19 March 2021, the Respondents called the Appellant. The Respondents again explained that the incorrect inclusion of Gift Aid in the Appellant’s tax returns had reduced the tax liability for those years. The Appellant stated he still did not understand and requested time to discuss the matter with his advisor, and to arrange a call between himself, his advisor, and the Respondents. That call was never arranged by the Appellant.

On 12 April 2021, the Respondents reached out to the Appellant to state that they had “thought of another way of explaining the tax position which will, hopefully, make things clearer”. The Respondents proceeded once more to explain how the amendments had arisen as a result of the incorrectly claimed Gift Aid relief, detailing the position for each year.

On the same day, the Appellant emailed the Respondents stating that he still did not understand the revised tax position and wished to appeal.

On 4 May 2021, the Respondents issued their View of the Matter letter, confirming that their view on the Closure Notices issued on 20 November 2020 remained the same. The letter observed that whilst the Appellant had repeatedly stated that the Respondents’ calculations were apparently wrong, he had not provided an explanation as to why they were said to be wrong or any evidence in support. The Respondents offered the Appellant a statutory review.

On 17 May 2021, the Appellant emailed the Respondents requesting to appeal to another office. On 7 June 2021, the Respondents emailed the Appellant for confirmation of whether the Appellant wanted an independent review. On the same day, the Appellant emailed the Respondents to accept the offer of a statutory review.

On 13 October 2021, the Respondents issued their statutory review conclusion letter, upholding the Closure Notices issued on 20 November 2020.

On 12 January 2022, the Appellant lodged their appeal to this Tribunal against the Closure Notices issued on 20 November 2020. The notice of appeal states as follows:

“I totally disagree with the reasons given and HMRC have told me several different contradictory things through this process.”

In response to the Respondents’ application for better and further particulars, the Appellant provided further grounds of appeal on 3 April 2023, which can be summarised as follows:

The issues that we need to consider are:

The burden rests on the Respondents to show that the Closure Notices are correctly issued. The burden rests on the Appellant to show that the conclusion and amendments made by the Closure Notices are not correct. The onus therefore lies with the Appellant to provide evidence to either reduce or set aside the figures set out in the Closure Notices.

The standard of proof is the ordinary civil standard, this being the balance of probabilities.

Section 9A TMA 1970 entitles the Respondents to make enquiries into a taxpayer’s self-assessment tax returns within the time allowed by the legislation.

Section 28A TMA 1970 provides that the enquiry is completed when an officer of the Respondents informs the taxpayer by a final closure notice that the officer has completed his enquiries. The final closure notice must state the officer’s conclusions and either state that no amendment of the return is required, or make the amendments of the return required to give effect to his conclusions.

Section 31(1)(b) TMA 1970 provides that an appeal may be brought against any conclusion stated or amendment made by a closure notice under section 28A or 28B of that Act (amendment by Revenue on completion of enquiry into return).

Section 414 of the Income Tax Act 2007 (“ITA 2007”) allows individuals to claim tax relief on gifts of money made to charities. The gift must be a qualifying donation and the individual must give the charity a gift aid declaration. The legislation further sets out that six conditions (A to F) need to be met in order for a gift to charity to be a qualifying donation.

The most relevant condition to this appeal is Condition A: “that the gift takes the form of a payment of a sum of money”. A payment of money must therefore be made to a charity in order for relief for Gift Aid to be claimed.

We have considered all the documentary evidence in the hearing bundle, including the Appellant’s notice of appeal, his better and further particulars (as set out in his email of 4 April 2023), and the witness statement of Mr Philip Lloyd. The Appellant and Mr Lloyd gave oral evidence and both were cross-examined. We have reflected carefully upon their evidence.

We find that the Appellant did not make charitable donations in the years under appeal that would make him eligible to claim relief for Gift Aid. This is confirmed in the Appellant’s own email to the Respondents dated 12 November 2019, where he states: “the amounts were minimal, and can be stating (sic) as zero for those years.”

That was a direct response to the Respondents asking him to confirm the correct amount of Gift Aid for the years under appeal. It was also in the context of Appellant having accepted in his previous emails of 15 August 2019 and 11 November 2019 that mistakes had indeed been made on the Gift Aid payments and that his tax returns had to be revised accordingly.

We reject any suggestion by the Appellant, made during the hearing, that he had in fact made charitable donations which would be eligible for Gift Aid relief. No evidence has been provided by the Appellant in support of that claim. Indeed, throughout the enquiry and up to this appeal hearing, no evidence in support of any eligible claim for Gift Aid relief in the tax years under appeal has been provided by the Appellant.

We have had regard to the correspondence passing to and from the parties as a result of the enquiries opened by the Respondents into the Appellant’s tax returns for the years under appeal, to the Closure Notices, and the written and oral evidence of Mr Lloyd.

We accept Mr Lloyd’s evidence in support of the conclusions reached in the Closure Notices and the amendments required in the tax returns. Once the figures for Gift Aid were removed from the Appellant’s returns, the tax liability for each year increased to reflect the amount of tax that the Appellant would have paid on his income if he had not incorrectly claimed the Gift Aid.

We find that the Closure Notices were correctly issued.

Far from providing inconsistent communications to the Appellant, it is clear from the correspondence that we have seen that, from the moment that the Appellant confirmed that his returns contained inaccuracies and that no charitable donations were made during the years under appeal (see his email of 12 November 2019), the Respondents’ position has been consistent throughout the enquiry, and throughout the appeals and review process.

It is also clear to us that the Respondents have repeatedly tried to explain to the Appellant the basis for the conclusions set out in the Closure Notices and why additional tax is now due.

Furthermore, we do not accept that this ground has any bearing on the issues that we need to determine. Even if the Respondents had been inconsistent in their communications with the Appellant – a contention which we reject – the Closure Notices were correctly issued. The amendments required to the tax returns, and the quantum of tax assessed in light of the amendments, are correct.

It is plain that the Appellant did submit tax returns for the years under appeal. HMRC’s systems show that tax returns were evidently filed for the tax years 2015/16, 2016/17 and 2017/18. The figures of Gift Aid reported in those returns have formed the basis of the Respondents’ enquiries for those tax years. We have seen the relevant screenshots pertaining to those returns.

The Appellant in his own email dated 15 August 2019 states that his “accountant put in the recent claims”, indicating not only that the returns were filed by his agent on his behalf, but that the Appellant was clearly aware that that had been done.

In his email dated 9 February 2020, the Appellant again confirmed that his agent submitted the returns, and does indeed refer specifically to a “return” being made in this email. We therefore reject the Appellant’s contention that no tax returns were submitted for the years under appeal.

The Respondents accepted the evidence provided by the Appellant on 7 October 2019 in relation to his business expenses. The enquiry thereafter focussed exclusively on the Appellant’s claims for Gift Aid relief.

There was no further mention of employment expenses until the Appellant provided his further and better particulars on 3 April 2023, contending for the first time that his mileage and phone bill expenses had not been calculated or factored in. No further details have been provided by the Appellant as to the expenses said to have been omitted.

The Closure Notices do not amend the tax returns insofar as they relate to the Appellant’s mileage and phone bill expenses. The revised tax calculations issued to the Appellant clearly show that the figure of allowable expenses remained the same as those declared by him in his tax returns for 2015/16, 2016/17 and 2017/18. The only changes were in relation to Gift Aid claimed, which were removed.

We therefore reject the Appellant’s contention that his mileage and phone bill expenses were not calculated or factored into the Closure Notices.

For the reasons set out above, the appeal is dismissed. The Closure Notices issued by the Respondent for the tax years 2015/16, 2016/17 and 2017/18 shall stand.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.