This article appeared in “The General Commissioner” and was written by the Head of Appeals Unit London.
Although the Regulations governing Commissioners’ Appeal
Hearings (Statutory Instrument 1811 of 1994 for Special
Commissioners and Statutory Instrument 1812 of 1994 for General
Commissioners), refer to evidence, nowhere in the Regulations or
elsewhere in the taxing statutes is that term defined. The usual
definition of evidence is related to fact and can become somewhat
tautologous unless a few terms are also defined.
Evidence is that which tends to prove a fact. It is that
which would satisfy a reasonable enquirer of the fact’s
existence. Relevant evidence is that which makes the fact more or
less provable. Direct evidence requires no inference on the part of
the decision-maker to accept it. Circumstantial evidence, on the
other hand, requires an inference on the part of the decision-
maker before it can be accepted. Fact is that which is known to be
true. To complete the definitions it is probably worth mentioning
that information is an item of knowledge and knowledge is knowing
by experience.
Section 50(6) of the Taxes Management Act 1970 presumes that
examination (in chief and cross-examination) is evidence and the
Section refers to ‘other evidence’. This Section
clearly requires evidence to reduce an amendment or assessment,
whereas the corresponding sub- section for increase on appeal
(Section 50(7) TMA 1970) is silent as to evidence, the Statute
merely states ‘If …. it appears to the Commissioners
….’.
It is entirely a matter for the Tribunal to decide what
evidence it accepts or rejects. Moreover, the Tribunal must
consider the admissibility, relevance and weight to be given to
each item of evidence.
There is specific authority at Regulation 15(6) (for General
Commissioners) and Regulation 17(6) (for Special Commissioners) to
admit evidence that would be inadmissible in a Court. However,
there is control of this possibly lower standard of evidence at
Regulation 15(4) which enables the Tribunal to evaluate the
evidence in question.
Evidence must, as a matter of law, be both admissible and
relevant. Whilst almost all evidence will be admissible before Tax
Tribunals, defining the relevance is much more difficult. In
Director of Public Prosecutions versus Kilbourne [(1973) AC 729 at
756] Lord Simm of Glaisdale said: ‘Evidence is relevant if it
is logically probative or disprobative of some matter which
requires proof .… It is sufficient to say ….. that
relevant (ie logically probative or disprobative) evidence is
evidence which makes the matter which requires more proof more or
less probable.’
The weight of evidence is its persuasive value. It is the
qualitative value the evidence has in relation to the point or
points in issue. Inevitably, the ultimate weight of any evidence is
inextricably bound up with the view the Tribunal takes of the
truthfulness, cogency and reliability of the witness after cross-
examination. Almost always, the demeanour of the witness affects
the weight of the evidence. Indeed, Regulation 15(4) of SI 1812 of
1994 specifically authorises such an evaluation:
‘In assessing the truth and weight of any evidence, the
Tribunal may take account of its nature and source, and the manner
in which it is given.’
Evidence can be given orally, of course, but it is common
nowadays (and invariably the subject of a Direction at the Special
Commissioners) to give evidence in chief in writing, by means of a
Proof of Evidence or a Witness Statement. A witness of fact
prepares a Witness Statement. A witness of opinion prepares a Proof
of Evidence. This makes the trial much more structured and
facilitates a better quality of cross examination. Although the
General Commissioners’ Regulations do not have the same
powers of Directions, it had been my experience that General
Commissioners welcome seeing Witness Statements or Proofs of
Evidence in advance of the Hearing, especially if they are
accompanied by Skeleton Arguments and the appropriate Document
Bundles. In substantial cases HMRC will seek co-operation and
reciprocation from the appellant’s representative in order to
provide advance copies, including a Statement of Facts not in
dispute. In any event, sufficient bundles, clearly referenced and
marked, should be made available to all relevant parties at the
Hearing.
These procedures not only make the Hearing far more orderly,
they also shorten the amount of time needed and generally reduce
the stress of the trial. In Scotland different procedures may apply
where some Tribunals will not accept Proofs or Witness
Statements.
There are two onera of proof –
This is with he or she who asserts ie the person who appeals against the determination, assessment or decision. Examples in Tax Law are an appeal against a refusal of loss relief (Section 42 etc), National Insurance matters, Construction Industry Scheme Certificates etc.
Whilst the Common Law onus of proof usually rests with the taxpayer, there are certain circumstances in Tax Law where the onus of proof will be firmly with the Crown. A clear example of that is a tax geared penalty determination under Section 95 TMA 1970, where HMRC alleges default and therefore has the right to open because it has the onus of proof. (The right to open carries with it the right to close the proceedings.)
The same Judge in a lively back duty case used these words:
‘But he is once again forgetting that the onus falls upon the
taxpayer to show that HMRC’s figure was wrong – an onus
which is not discharged merely by showing there may have been an
explanation for the accretion in Mr Jonas’s wealth, not that
there in fact was’. (Jonas versus Bamford TC 51 Page 24 at
Paragraph G.)
This was further discussed in the more recent case Hurley
versus Taylor (71 TC 268).
Some might think it odd that there is a statutory onus of
proof placing the burden with the taxpayer, but the reason for this
is given in a number of tax cases. Perhaps best known is the
explanation of Pennycuick J in Hudson versus Humbles (TC 42 at Page
387): ‘the taxpayer knows the full facts, and HMRC does
not’. Despite what some practitioners might think,
HMRC’s information gathering powers are limited. After all,
it is always open to any person or company to refuse to provide
information or make a Return, choosing to pay the fine or penalty
instead.
There are numerous examples in Law where the statutory onus
is with the defendant or appellant and it is worth mentioning some
of those. The Gaming Act 1968 Part III Section 13; The Road Traffic
Act 1988 Section 143 in respect of car insurance, and The
Firearms Act 1968 Section 1 in respect of a shotgun.
There is an interesting anomaly in Section 28A(6) TMA 1970
where there is an onus on the Tribunal to give a direction to close
an enquiry ‘unless they are satisfied that there are
reasonable grounds for not issuing a closing notice within the
specified period’. This seems to be balanced by the slightly
unusual wording of Section 19A(2)(a)(i) which requires the
production of documents in the taxpayer’s possession or power
which the Officer of the State may reasonably require for the
purpose of determining whether and, if so, the extent to which a
Return is incorrect or incomplete, rather than to check if it is
correct.
From time to time the issue of proving a negative arises.
Most commonly in tax tribunals this happens when a married woman
appeals against an insurance officer's decision on the level of
national insurance pension payable. The appellant has to prove that
she did not sign an Election to pay a lower rate of national
insurance contribution some forty years ago. In these circumstances
the general rule that it is better to require proof of a positive
rather than a negative proposition applies and the burden will
shift to the respondent. There is much case law to support this,
but the most commonly quoted case is: Joseph Constantine Steamship
Line versus Imperial Smelting Corporation Ltd (1942) AC 154, where
Lord ? Russell of Killowen said, at page 177: '.......the task of
proving a negative, a task always difficult and often impossible,
would be a most exceptional burden to impose on a litigant......I
know of no case....in which an attempt has been made, or called
for, to prove the suggested negative.'
Section 100B(2) TMA 1970 specifically excludes the statutory
onus of proof (Sections 50(6) to 50(8)) from applying to appeals
against penalties. It follows, therefore, that the onus reverts to
the person making the assertion ie the officer who made or
authorised the penalty determination. However, in penalty appeals
the evidential burden will feature greatly and especially so with
the so-called 'flat-rate' penalties charged under Section 93 TMA
for the late filing of a Return.
Put another way, when HMRC makes a penalty determination it
is asserting that there has been an offence committed. The onus of
proof and evidential burden rest firmly with The Crown. In the case
of a flat-rate penalty of any type we must adduce evidence of the
alleged failure. The appellant can either introduce evidence to
rebut or offer their 'reasonable excuse'. The evidential burden is
likely to be significant in all 'failure' penalty cases, especially
so when the penalty is charged for failure to comply with an
obligation, such as not making a return by a specified date.
This can shift during the course of a trial, not just generally
but on individual aspects. However, the evidential burden operates
quite separately from the onus of proof. If the onus of proof is
lost, then the other side wins. With the evidential burden, it is
possible to lose a number, indeed many, aspects and still win the
case.
The statutory requirement to keep records for tax purposes,
Section 12B, Taxes Management Act 1970, may well mean that the
appellant will have difficulty in discharging the evidential burden
if those records fail to meet that statutory requirement.
This is ordinarily explained as the balance of probabilities.
The leading case is In Re H and Others (Minors) (Sexual Abuse:
Standard of Proof) (1996) AC 563. The more serious the accusation
the higher the standard of proof must be. Where facts are in
dispute the preponderance of probability is the issue ie what, on
the evidence, is the more likely version of events.
It is important to consider exactly what the evidence proves.
In many cases there is evidence of unexplained bankings,
unexplained capital accretions, wealth or personal expenditure to
support HMRC amendment or additional assessments. Similarly,
business economics based on information derived from the taxpayer's
own records can show that the accounts are unreliable. If the
Inspector is able to show that the business records are inadequate
and that the Return in consequence cannot be accurate, it is always
open to the Inspector to substitute different figures. At this
point business economics become very useful for re-computing the
profit from evidence of the taxpayer's own business or other
reasonable external comparisons. In Coy versus Kime (59 TC 447) the
General Commissioners, having found as a fact that the trader's
records were unreliable, accepted a computation by the Inspector
using a Family Income Survey produced by the Department of
Employment. Mr Coy argued that the Inspector's figures referred to
average families and not necessarily with any extremes of low or
high expenditure. However, as was pointed out by the Judge in the
High Court, the General Commissioners had not, as against the
evidence of the Family Income Survey, any accurate evidence from
the appellant of his actual expenditure; they simply had his own
estimation of what his expenditure on various household and
personal matters was. (Paragraph B on page 457.) This is a cogent
example of the importance of adducing evidence of sufficient weight
and relevance to prove the point at issue.
