Slater Ltd & Ors v Applicant

Company-law accounting obligations and corporation-tax information requirements are not co-extensive. A small company’s entitlement to prepare abbreviated financial statements does not limit its obligation to keep accounting records sufficient to show and explain its transactions. Those records may include detailed administrative-expense information needed to check declared taxable profits. A notice requiring such information under the applicable tax procedure is not invalid merely because the information is unnecessary for abbreviated company accounts.

Seven small companies appealed against estimated corporation-tax assessments for 1995 to 1999. The General Commissioners issued notices under regulation 10 of the General Commissioners (Jurisdiction and Procedure) Regulations 1994, requiring information, books, accounts and documents. Following incomplete compliance, they imposed penalties.

Lightman J dismissed the companies’ appeals, holding that the penalties were properly imposed and not excessive: [2002] STC 246. The companies sought permission to appeal, arguing that their status as small companies entitled them to provide abbreviated accounts and that the Inland Revenue could require only information needed for those accounts. The central issue was whether company-law accounting concessions restricted the tax authority’s power to require further accounting information.

1. Application refused. Lord Justice Robert Walker concluded that the proposed appeal was hopeless.
2. The entitlement of a small company under section 246 of the Companies Act 1985 to present abbreviated financial statements does not displace the general obligation under section 221 to keep accounting records sufficient to show and explain the company’s transactions. That obligation necessarily included the amount spent on administrative expenses and particulars of those expenses.
3. Company-law requirements are not presumed to be co-extensive with the information required to compute corporation-tax liability and verify profits submitted to the Inland Revenue. The tax authority therefore was not confined to requesting information appearing in abbreviated accounts.
4. R v O’Kane ex parte Northern Bank Ltd [1996] STC 1249 concerned different statutory provisions and a different factual situation. It did not assist the companies’ argument. The decision was concerned with obtaining documents and information from a third-party bank, where compliance costs were said to be substantial and the material likely to be largely or wholly ignored.
5. The penalties imposed by the General Commissioners were upheld in substance. The application for permission to appeal was refused.

• Court of Appeal (Civil Division): application for permission to appeal refused.
• High Court: Lightman J dismissed the companies’ appeals against penalties imposed by the General Commissioners, holding that the penalties were properly imposed and not excessive: [2002] STC 246.
• General Commissioners: imposed penalties totalling £1,000 and subsequently £2,450 for non-compliance with notices issued under regulation 10 of the General Commissioners (Jurisdiction and Procedure) Regulations 1994.