Dass v  Revenue & Customs [2006] UKSPC SPC00570 (01 June 2006)
SPC00570

INCOME TAX  -  Claim to deduct £200 paid as an exam fee as vocational training relief under s. 32 FA 1991 - alternative claim as a Schedule D Case I expense - whether income or capital expenditure - general claims of unfair treatment - Appeal dismissed

THE SPECIAL COMMISSIONERS

MR D K DASS	Appellant

-	and –

THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS 	 Respondents

Special Commissioner:  HOWARD M NOWLAN

Sitting in public in London on 22 May 2006

The Appellant in person

Mr P C Williams for the Respondents

© CROWN COPYRIGHT 2006

DECISION

INTRODUCTION

1.     This was an appeal that fundamentally raised the question of whether Mr Dass, trading under the name “Bengali European Enterprise” was entitled to a deduction in the tax year 1998/99 for £200 spent on re-sit fees for an examination for an LLDip qualification with Holborn College. Relief was claimed either (and historically speaking, principally) as vocational training relief, relievable under section 32 Finance Act 1991, or as an ordinary trading deduction.

2.     Mr Dass had also brought various claims of wrongdoing against HM Revenue & Customs (“HMRC”) for delay, and alleged failures somehow related to the involvement or lack of involvement on the part of the General Commissioners in relation to a claim made in the following tax year, 1999/2000 (which was for some reason dealt with before the return for the later period 1998/99) in which Mr Dass also paid identical re-sit fees. In relation to this period HMRC had initially disputed the claim on the ground that the expenditure was capital expenditure, but they subsequently allowed it on a “without prejudice” basis, because the sum involved was so small. There were various other claims of wrong-doing on the part of HMRC related to not responding to telephone enquiries and giving misleading advice, and Mr Dass also contended that his rights under the Human Rights Convention had been breached. 

THE FACTS

3.    Mr Dass traded as a tutor in English and as an adviser in relation to the bringing of appeals before various tribunals.  In or around 1997 he embarked on a course with Holborn College. This course was a part-time two-year course and would have led to an LL Dip Qualification had Mr Dass been able to take the examinations and pass them. As it was, although he twice enrolled for the examinations, he was unwell on both occasions and so was unable to sit the examinations, though he still incurred the cost of the examination fees of £200 in both 1998 and 1999.      

4.    In his own words, the description of his trade and activities prior to enrolling on the Holborn course was as follows. “My services included moderation and examination in English, translation and word processing, settling and marking of written and oral exams, reporting any malpractice of examination regulations, also admin and evaluation work, producing examination reports”. It also included “Giving advice and guidance to clients about statutory and human rights; self-assessment, personal development, presentation and communication skills, drafting witness statements and complaints, advice about dealing with discriminatory and detrimental treatment with reference to payment, pay advice, promotion, equal opportunities in the field of education, employment and training; taking notes, acting as a witness, making representations at a tribunal”.   

5.    In describing the Holborn course, Mr Dass said that “the LL Dip Studies improved my communication and analytical skills. It also widened my knowledge about reasoning, contractual rights, obligations, breach of contract, human rights, legal principles and administrative law. This course would ultimately broaden my options by enabling me to teach law in Access Courses in FE and help individuals with their studies, jobs, work experience and career progression in further and higher education. The LL Dip Qualification would enable me to motivate bilingual students to choose legal careers.  It would help me to analyse various problems people face in full and part time education, employment and training and to draw up action plans to resolve those problems.  It would also enable me to advocate their cases in respective tribunals and Exam Boards”.  

6.    HMRC described the Holborn course as a “bridging course” towards becoming a solicitor. Although Mr Dass said that at his age (presumably about 53), when he enrolled on the course, he had no intention of going the further step of qualifying as a solicitor, which I accept, I also accept HMRC’s description of the nature of the Holborn course. Whilst Mr Dass’s pre-existing activities in part involved work in preparing people for hearings before tribunals, it appears to have been predominantly related to English, translation and education.  The LL Dip course was clearly going to enable Mr Dass “to advocate (clients’) causes in respective tribunals and Exam Boards”, and equally clearly it was going to increase Mr Dass’s legal knowledge and capabilities. 

7.    As I have already said HMRC initially disputed Mr Dass’s entitlement to relief for the second of the exam fees, which were dealt with first for some reason, on the ground that the expenditure was capital expenditure, but subsequently conceded the relief on a “one-off” or without prejudice basis because the amount claimed was so small. 

8.    This appeal relates to the fact that HMRC disallowed similar relief for the earlier fee which they dealt with subsequently. Mr Dass objected to this, not so much it seems because he then understood the conditions for entitlement to relief as vocational training relief, allowable under section 31 Finance Act 1991, or because he argued that the course was a mere adjunct to, or “refresher” in his existing activities, and not a course that would equip him with new skills and a new qualification”, so that the exam fees ranked as income rather than capital expenditure, but rather because of inconsistency with his treatment on the identical other fee. He claimed that there has been some unfairness in dealing with the earlier fee (notwithstanding that the fee had, in the event, been allowed) either because the General Commissioners had heard his case in his absence or because the Inspector had wrongly acted as advocate and judge in relation to his case. 

9.    The case was further confused by various omissions and misunderstandings.  It appears that in some way HMRC had lost one of Mr Dass’s tax returns, and there were then numerous complaints by Mr Dass about wrong advice in the leaflet that shortly described vocational training relief, and failure to respond to telephone enquiries. 

10.   HMRC then reviewed the case fully and wrote a series of letters that explained the full position very clearly to Mr Dass. On 21 November 2002 Mr G M Lewis wrote an excellent and clear letter explaining HMRC’s actions and approach in full. More significantly on a further review, Mike Kirwan, HMRC’s Regional Complaints Manager, wrote a four page letter on 14 March 2003, explaining in a very clear and courteous manner every relevant point in relation to the dispute. It explained that to qualify for Vocational Training Relief under section 32, relief was given either for courses that lead to an NVQ or SVQ qualification, or under “the alternative route”. The letter explained that the course in the present case did not lead to either of the two specific qualifications referred to. It explained that relief under the alternative route had to meet the requirements of Section 589 Taxes Act, one of which was that the course had to be for no more than one year.  On this ground, and on another which I need not refer to, it was confirmed that relief was rightly refused under this head. 

11.    Mr Kirwan went on to repeat the reasons that had already been given on several occasions, as to why the expenditure ranked as capital and not income or revenue expenditure. 

12.   Mr Kirwan then proceeded to deal, in my view very fairly, with a number of Mr Dass’s complaints, and claims for further compensation. The three major claims for compensation were a claim for £480 for “loss of earnings due to extra admin work”, £300 for “preparation for Appeal”, and £500 for “compensation for negligence, delays and poor customer services; causing inconvenience and stress”. That list had been compiled in 2002 so that had I had power to arbitrate on the admissibility of such claims I rather imagine that the quantum of the claim for compensation might have been considerably increased.  In dealing with these claims patiently and courteously Mr Kirwan compensated Mr Dass for his extra costs in relation to the lost tax return; he rather naturally refused the claim for costs in relation to an appeal when there was no appeal in relation to the first claim dealt with because HMRC allowed the relief on a “one off” or “without prejudice” basis; he compensated Mr Dass for his administrative costs, and gave him £50 for “worry and distress”, making a total payment of £103.

13.   Mr Kirwan also explained the appeal processes in full in an effort to persuade Mr Dass that the earlier case had never been before the General Commissioners, and that there was nothing improper in the Inspector allowing a claim in full on a “one off” basis, even when it was thought not to be admissible.  There was no breach of natural justice in the Inspector acting in this way as advocate and judge, in that had the decision been against Mr Dass, he could have appealed to the General or Special Commissioners.  But obviously this was not appropriate when Mr Dass could hardly appeal against a decision in his favour. 

14.     I can only describe Mr Kirwan’s letter as impeccable, courteous and patient.

THE DECISION

15.    It was never disputed by Mr Dass that the qualification he was seeking constituted either a NVA or SVQ qualification. As it was not disputed that the course at Holborn college was a two year course, it inevitably follows that one of the requirements for relief in section 589 Taxes Act was not met. The fact that a very short explanatory pamphlet explaining the nature of the relief under these sections did not refer to all the conditions for the relief is perhaps unfortunate, but this cannot change the entitlement to the relief. 

16.    I agree with HMRC that the particular course was one to equip Mr Dass with a new qualification that would have enabled him to venture into new areas of practice, and it was not merely a “refresher” in relation to his existing expertise. This seems to me to be a correct way of distinguishing between the costs (in relation to courses) that constituted capital as distinct from revenue expenditure. It is noteworthy that it was on this basis that relief was initially disputed for the first exam fee dealt with, and the contrary decision was only made on a “one off” basis. I think that HMRC applied the test correctly and, I was told, in a manner consistently with the treatment of all other taxpayers. 

17.    I have no jurisdiction in relation to Mr Dass’s complaints about delays and other incompetence on the part of HMRC. I will however add that even if a tax return was once lost, most of the correspondence on the part of HMRC that I have seen (and it has had to be voluminous) is a credit to the standards of HMRC. 

18.    It was not entirely clear to me which human rights were said to have been infringed. In so far as they related to various misunderstandings as to the handling of the first claim to be dealt with, it is hard to see that any of Mr Dass’s human rights were breached by HMRC conceding a claim for relief in his favour which they thought (rightly as it transpires!) was not due. As to the present appeal, I cannot compensate Mr Dass for alleged delays etc, and my only power is to arbitrate on his claim for relief, under the two particular headings. On those he has had a fair hearing, and I have found in favour of HMRC. 

19.    I will finally mention that on the assumption that Mr Dass pays income tax at the top rate, the amount of tax that he would have saved had he won his appeal would only have been £80, which is less than the £103 compensation that he has already been paid, and a minute percentage of the costs that HMRC will have incurred in dealing with this case, and in sending several HMRC officials to London from Wales to give Mr Dass his clear entitlement to a fair hearing. 

HOWARD M NOWLAN
SPECIAL COMMISSIONER

RELEASED: 1 June 2006

SC 3033/2006