Johnson v Revenue and Customs

A taxpayer’s failure to comply with a valid notice under Taxes Management Act 1970, section 20, may be adjudicated without a pleading-like schedule specifying every default. The taxpayer is ordinarily better placed than the Revenue to identify the documents and information within his possession or power. There is no automatic requirement for the Revenue to disclose all third-party material before a penalty hearing. Any residual case-management or disclosure powers belong to the tribunal, whose decision is reviewable for error of law or perversity. Where non-compliance is established, the tribunal may assess the penalty by considering the extent of compliance, efforts made, difficulty of compliance and awareness of the duty.

Mr Johnson appealed against the General Commissioners’ decision of 17 July 2007. The Commissioners found that he had failed to comply with a notice served under section 20 of the Taxes Management Act 1970 and imposed the maximum penalty of £300 under section 98.

The notice required documents and communications concerning a share transfer and associated arrangements, together with a full explanation of their purpose. Following earlier judicial review proceedings, Mr Johnson supplied only a stock transfer form and gave no substantive explanation. Before the Commissioners, he sought an adjournment pending fuller particulars of the alleged non-compliance and disclosure of all material obtained from third parties. The central issues were whether the Commissioners could proceed without those matters and whether refusal of the adjournment or disclosure rendered the hearing unfair.

1. The appeal was dismissed. The finding of non-compliance and the £300 penalty were upheld.
2. The section 20 notice was valid and the time for compliance had expired. Mr Johnson had done nothing material to comply by the relevant time. The Commissioners were entitled to treat the fact of non-compliance as established and to consider any late or partial compliance only in mitigation of penalty.
3. There was no statutory rule, procedural rule or authority requiring the Revenue to provide a pleading-like specification of every respect in which the taxpayer had failed to comply. The taxpayer was better placed to know what documents and information existed. The Inspector nevertheless identified the principal shortcomings at the hearing, and the Commissioners were entitled to proceed on the material before them.
4. There was likewise no automatic entitlement to disclosure of every document obtained from third parties. Even if the Commissioners possessed a residual power to require disclosure for a fair hearing, its exercise was a matter of case management. The refusal to require further disclosure disclosed no error of law or real unfairness. Mr Johnson could have answered the Revenue’s inferences by providing evidence and offering himself for cross-examination, but did not do so.
5. The refusal to adjourn fell within the permissible range of decisions available to the Commissioners. It was not perverse in the Edwards v Bairstow sense. In assessing penalty, the Commissioners were entitled to consider the degree of compliance, effort to comply, difficulty of compliance and awareness of the duty, and to impose the maximum penalty on the facts.

• High Court (Chancery Division): the appeal from the General Commissioners was dismissed. The finding of non-compliance and the £300 penalty were not altered.
• General Commissioners: on 17 July 2007, found non-compliance with the section 20 notice and imposed a £300 penalty.