Scott Thompson v The Commissioners for HMRC
[2024] UKFTT 138 (TC)
Charles Collier & Anor v The Commissioners for HMRC
21 November 2023
[2023] UKFTT 993 (TC)
First-tier Tribunal
Someone's accountant made mistakes on their tax returns. The tax office tried to charge them extra tax and penalties years later. The court ruled that the mistakes were accidental, not intentional, so the extra charges were cancelled because they were issued too late.
Key Facts
- •Appeal against HMRC assessments and penalty determinations for income tax returns for years ended 5 April 2007 to 5 April 2011.
- •Assessments issued more than six years after the end of the relevant year of assessment.
- •Appellants admitted omissions but argued they were due to negligent conduct, not deliberate actions.
- •Appellants argued that HMRC's discovery under section 30B TMA 1970 was invalid.
- •Appellants' accountant, PC, experienced a decline in work quality following a family tragedy.
- •Appellants' business records were destroyed in a fire.
- •HMRC investigated under Code of Practice 9.
- •Mr. Collier has dyslexia.
Legal Principles
Time limits for assessments under the Taxes Management Act 1970 (TMA 1970).
TMA 1970, sections 34, 36(1), 36(1A)
Burden of proof rests on HMRC to demonstrate that statutory conditions for assessments and penalties are met.
Case law and HMRC acceptance
Standard of proof in tax cases is the balance of probabilities.
Re B (Children) [2009] UKHL 38
Definition of 'deliberate inaccuracy' in tax returns; subjective test focusing on taxpayer's knowledge and intent.
Auxilium Project Management Limited v HMRC [2016] UKFTT 0249 (TC)
Considerations of 'blind-eye knowledge' and recklessness in relation to deliberate inaccuracies.
CPR Commercials Ltd v HMRC [2023] UKUT 61
Whether recklessness equates to deliberate inaccuracy.
HMRC v Tooth [2021] UKSC 17; Clynes v HMRC [2016] UKFTT 369 (TC); Soleimani-Mafi v HMRC [2018] UKFTT 451 (TC); Cation v HMRC [2021] UKFTT 311 (TC)
Outcomes
Appeal allowed.
HMRC failed to prove that the loss of tax was brought about deliberately by Mr. Collier. The assessments and amendments were made more than six years after the end of the relevant tax year, making them out of time and invalid. The penalties were also deemed invalid as they were based on the invalid assessments and amendments.