Introduction

The case of Rotberg v. Revenue & Customs ([2014] UKFTT 657 (TC)) addresses significant issues concerning the scope of tribunal jurisdiction under tax law and the attribution of tax liabilities due to negligent conduct by tax advisors. The appellant, Mrs. Karen Rotberg, challenged assessments made by HM Revenue & Customs (HMRC) for capital gains tax (CGT) pertaining to the disposal of shares in her private companies. Central to her appeal were claims that HMRC's representations created a legitimate expectation that no CGT would be payable, thereby affecting her ability to seek alternative tax reliefs such as the Enterprise Investment Scheme (EIS) relief.

Summary of the Judgment

The First-tier Tribunal (Tax Chamber) dismissed Mrs. Rotberg's appeal, concluding that HMRC did not have a duty to consider legitimate expectation claims within its jurisdiction under section 50(6) of the Taxes Management Act 1970 (TMA). Furthermore, the tribunal found that the loss of CGT liability was attributable solely to the negligent conduct of Mrs. Rotberg's accountant, Mr. Peter Michell, who mistakenly advised her on the availability of rollover relief for the disposal of shares, which was not applicable under the existing tax code.

Analysis

Precedents Cited

The judgment extensively references several precedents to delineate the boundaries of tribunal jurisdiction and the application of negligence in tax assessments:

• Oxfam v Revenue and Customs Commissioners [2010] STC 686: Addressed the tribunal's ability to consider legitimate expectation within its jurisdiction.
• Abdul Noor v Revenue and Customs Commissioners [2011] UKFTT 349 (TC): Clarified that public law arguments like legitimate expectation fall outside the tribunal's jurisdiction.
• Aspin v Estill [1987] STC 723: Established that legitimate expectation claims relating to tax assessments must be pursued through judicial review, not tribunal appeals.
• Asylum and Immigration Tribunal cases: Highlighted limitations of tribunal jurisdiction in public law matters.

These precedents collectively reinforced the tribunal's stance that public law issues, including legitimate expectation, are not within its purview when considering tax assessments under section 50(6) TMA.

Legal Reasoning

The court meticulously analyzed the statutory framework governing tribunal jurisdiction and the grounds for reducing tax assessments. Key points include:

• Section 36(1) TMA: Allows HMRC to make assessments beyond the ordinary time limits (typically five years) if the loss of tax is attributable to fraudulent or negligent conduct.
• Section 50(6) TMA: Limits the tribunal's jurisdiction to reducing assessments if the appellant is found to be overcharged by the amounts stipulated within.
• Burden of Proof: HMRC bears the responsibility to demonstrate that the loss of tax is due to negligence or fraud on the part of the taxpayer or their representative.

Applying these sections, the tribunal concluded that while HMRC did not act negligently, the negligent conduct of Mrs. Rotberg's accountant was directly responsible for the erroneous CGT assessments. Additionally, the tribunal determined that legitimate expectation claims, as argued by Mrs. Rotberg, are beyond its statutory jurisdiction and should instead be addressed through judicial review processes.

Impact

This judgment underscores the strict delineation of tribunal jurisdictions in tax matters, particularly emphasizing that public law claims such as legitimate expectation cannot be entertained within tribunal appeals. Consequently, taxpayers seeking to challenge such representations must pursue judicial review avenues. The decision also highlights the critical importance of professional diligence by tax advisors, as negligence on their part can significantly impact taxpayers' liabilities.

Complex Concepts Simplified

Conclusion

The Rotberg v. Revenue & Customs decision clarifies the limitations of tribunal jurisdictions in tax disputes, particularly in excluding public law assertions like legitimate expectation from considerations aimed at adjusting tax liabilities. It reinforces the necessity for taxpayers to seek judicial review for claims rooted in public law principles and underscores the paramount importance of accurate and diligent tax advice from professionals. The judgment serves as a crucial precedent, guiding both taxpayers and tax advisors on the appropriate avenues for contesting tax assessments and the boundaries of tribunal authority.