GN Khan v The Commissioners for HMRC
[2024] UKFTT 615 (TC)
Finola Owens v The Commissioners for HMRC
6 March 2024
[2024] UKFTT 192 (TC)
First-tier Tribunal
Someone didn't pay their rental income tax. They told the tax office they owed money, but didn't say how much or from what. The tax office correctly assessed the unpaid tax and added penalties. The court said the tax office was right because the taxpayer hadn't given enough information initially.
Key Facts
- •Finola Owens appealed five discovery assessments totaling £24,423.16 and five penalties totaling £4,008.54 for unpaid rental income tax from 2016-17 to 2020-21.
- •Owens' agent repeatedly notified HMRC of her tax liability but failed to provide sufficient information (income source and amount) to allow HMRC to assess the tax.
- •HMRC issued discovery assessments under Section 29 Taxes Management Act 1970 (TMA 1970) after discovering the unpaid tax.
- •HMRC also imposed penalties under Schedule 41 of the Finance Act 2008 (FA 2008) for failure to notify.
- •The appeal argued that valid notices of chargeability were served, that there was no prescribed format for such notices, and that HMRC failed to issue a notice to file a return.
Legal Principles
Section 29 TMA 1970 allows HMRC to make discovery assessments when income that ought to have been assessed is discovered to be unassessed or insufficiently assessed.
Taxes Management Act 1970
Section 7(1) TMA 1970 requires individuals liable to income tax to notify HMRC within six months of the tax year's end. However, the notification must contain sufficient information for HMRC to act.
Taxes Management Act 1970
Section 36(1A)(b) TMA 1970 sets a 20-year time limit for assessments related to failure to notify under Section 7.
Taxes Management Act 1970
Section 50(6) TMA 1970 places the onus on the appellant to prove overcharging in an assessment.
Taxes Management Act 1970
Section 114 TMA 1970 states that assessments are not invalidated for want of form if they are substantially in line with the Taxes Acts.
Taxes Management Act 1970
Schedule 41 FA 2008 outlines penalties for failure to notify, categorizing culpability and setting penalty amounts.
Finance Act 2008
For a valid discovery assessment under Section 29 TMA 1970, HMRC must subjectively believe there is an insufficiency of tax, and this belief must be one a reasonable officer could form (objective test).
Jerome Anderson v HMRC [2018] UKUT 0159 TCC
Outcomes
Appeal dismissed.
The agent's notifications to HMRC were insufficient, lacking details of the income source and amount, failing to meet the requirements of Section 7 TMA 1970. The discovery assessments were validly issued under Section 29 TMA 1970, within the time limit of Section 36(1A)(b), and the penalties were correctly calculated under Schedule 41 FA 2008.