Steven Hague v The Commissioners for HMRC
[2024] UKFTT 139 (TC)
E v The Commissioners for HMRC
7 October 2024
[2024] UKFTT 890 (TC)
First-tier Tribunal
A takeaway owner didn't pay taxes for almost 20 years. The tax office used his bank statements to figure out how much he owed. The owner tried to say he was poor and had family issues, and that he didn't know he had to pay taxes. The court said he had to pay, because he knew the rules and chose not to follow them.
Key Facts
- •Mr. E appealed discovery assessments totaling £204,775.93 (later amended to £158,979.39) for unpaid income tax from 2000/01 to 2018/19.
- •Mr. E operated a takeaway food business for almost two decades without notifying HMRC or filing tax returns.
- •HMRC used bank statements to estimate Mr. E's turnover, which he disputed, claiming some deposits were loans from family overseas.
- •Mr. E argued his business performed poorly due to short licensing hours, location, and lack of resources.
- •Mr. E claimed he believed he wasn't required to file returns due to being below the VAT threshold and to avoid receiving state benefits.
- •The Tribunal considered the validity of the assessments, the quantum of the assessments, and the penalties imposed.
Legal Principles
Open justice is the starting point for hearings, but derogations are allowed where a public hearing would breach the European Convention on Human Rights.
Case law
Discovery assessments under s29 Taxes Management Act 1970 (TMA 1970) can be raised if HMRC discovers unpaid income.
s29 TMA 1970
'Discover' means 'to come to the conclusion' from any information received by an HMRC officer (Charlton [2012] UKUT 770 (TCC)).
Charlton [2012] UKUT 770 (TCC)
Time limits for raising assessments are four years (s34(1) TMA 1970), extended to 20 years under certain circumstances (s36(1A) and s36(1) TMA 1970).
s34(1), s36(1A), s36(1) TMA 1970
Negligence is defined as failing to do what a reasonable taxpayer would have done or doing something no reasonable taxpayer would have done.
Case law
The burden of proof lies on the taxpayer to displace HMRC's assessment of turnover.
Case law
HMRC is entitled to use available information to make a fair estimate of turnover if the taxpayer lacks records.
Case law
Penalties for failure to notify HMRC of tax liability are governed by s7(8) TMA 1970 and Schedule 41 FA 2008, with considerations for cooperation, disclosure, and the seriousness of the failure.
s7(8) TMA 1970, Schedule 41 FA 2008
Deliberate behaviour for penalty purposes includes actively deciding not to comply or suspecting an inaccuracy but not confirming the true position without good reason (Tooth [2021] UKSC 17).
Tooth [2021] UKSC 17
A reasonable excuse for a failure to comply with tax obligations must be objectively reasonable considering the taxpayer's circumstances (Perrin [2018] UKUT 156 (TC)).
Perrin [2018] UKUT 156 (TC)
Special circumstances for penalty reduction must be specific to the taxpayer, not applicable to a class of taxpayers.
Case law
Outcomes
The appeal was dismissed.
The Tribunal upheld the amended assessments and penalties. Mr. E failed to demonstrate a fair estimate of his turnover and overheads were incorrect and failed to establish a reasonable excuse for his failure to notify HMRC or file returns.