Roger William Morgan & Anor v The Commissioners for HMRC
[2024] UKFTT 565 (TC)
Arshad Mahmood v The Commissioners for HMRC
25 January 2024
[2024] UKFTT 114 (TC)
First-tier Tribunal
A man transferred properties to his wife's company and didn't pay capital gains tax. He tried to say he canceled the transfer, but the court said the transfer still happened and he owed taxes. The tax bill was lowered because of mistakes in the original calculation.
Key Facts
- •Mr. Mahmood transferred properties to a company owned by his wife in 2016.
- •He did not report a capital gains tax liability on his tax return.
- •HMRC issued a closure notice resulting in an additional tax liability of £303,476 and a penalty of £81,938.52.
- •Mr. Mahmood and the company subsequently agreed to 'rescind' the transfer.
- •The rescission was based on a mistaken belief about the availability of a spouse exemption.
- •Mr. Mahmood appealed against the closure notice and penalty.
Legal Principles
Common mistake can render a transaction void if the mistake is fundamental to the subject matter or performance of the transaction, not merely its consequences.
Bell v Lever Brothers Limited [1932] AC 161
Parties can agree to rescind a partially executed contract, but rescission doesn't erase past performance.
Chitty on Contracts (35th edition)
A closure notice under s 28A TMA must state conclusions and amend the tax return; a separate amendment by HMRC isn't required for tax liability to arise.
The Queen on the application of Archer v HMRC [2017] EWCA (Civ) 1962; s 28A TMA; s 31 TMA; Schedule 1A TMA
Under s 50(6) TMA, if a self-assessment is overcharged, the Tribunal can reduce the assessment.
s 50(6) TMA
An inaccuracy penalty under Schedule 24 Finance Act 2008 can be imposed for careless inaccuracies in tax returns.
Schedule 24 Finance Act 2008
Outcomes
Appeal dismissed.
The transfer of properties was not voidable for common mistake. The closure notice was valid, even without a separate amendment to the tax return. The tax liability and penalty were reduced to reflect corrected valuations and tax rates.