Mark Campbell v The Commissioners for HMRC
[2023] UKUT 265 (TCC)
Gary Ives v The Commissioners for HMRC
13 November 2023
[2023] UKFTT 968 (TC)
First-tier Tribunal
Gary bought, fixed up, and sold houses. The government said he was running a business and owed more taxes. Gary said the houses were his homes, and he only sold them because of family issues. The judge believed Gary and said he didn't owe as much tax, except for a little bit of rent money he forgot to report.
Key Facts
- •Mr. Gary Ives appealed four discovery assessments and related penalty determinations for tax years 2003/04 to 2006/07, and three closure notices with penalty assessments for tax years 2010/11, 2011/12, and 2013/14.
- •Discovery assessments related to omitted rental income from a flat.
- •Closure notices concerned profits from three property transactions: purchase, redevelopment, and sale of dwelling houses.
- •HMRC argued the profits were trading profits, while Mr. Ives claimed capital gains exemption under PPR relief.
- •The total amount in dispute was nearly £1 million.
Legal Principles
Jurisdiction of the Tribunal to determine the 'matter in question' in appeals against closure notices.
Sections 49D(3), 49G(4), 49I, 28A(2), and 50 TMA 1970; Tower MCashback LLP v HMRC [2008] EWHC 2387 (Ch); Tower MCashback LLP v HMRC [2011] UKSC 19; Fidex Ltd v HMRC [2016] EWCA Civ 385; Investec Asset Finance PLC v HMRC [2020] EWCA Civ 579.
Determining whether an activity constitutes a trade, considering 'badges of trade'.
Section 5 ITTOIA 2005; Section 989 ITA 2007; Marson v Morton [1986] STC 463.
Principal Private Residence (PPR) relief under Capital Gains Tax (CGT).
Sections 222, 223, and 224 TCGA 1992; Goodwin v Curtis [1988] STC 475; Patricia Lam v HMRC [2018] UKFTT 0310 (TC).
Definition of 'deliberate inaccuracy' for penalty purposes.
Schedule 24 Finance Act 2007; Auxilium Project Management Limited v HMRC [2016] UKFTT 249 (TC); Anthony Clynes v HMRC [2016] UKFTT 369 (TC); Palminder Singh Sanghera v HMRC [2020] UKFTT 225 (TC).
Outcomes
The 'matter in question' included both income tax and CGT liability.
The closure notices, read in context with HMRC's letter, indicated consideration of both liabilities.
The property transactions were not trading profits.
While some 'badges of trade' were present, Mr. Ives' narrative of acquiring properties as family homes, coupled with the lack of challenge to witness testimony, persuaded the Tribunal that these were investment gains.
PPR relief was applicable to the capital gains.
Despite inconsistencies with council tax declarations, the Tribunal accepted Mr. Ives' evidence of the properties being his residence, supported by witness accounts.
The under-declaration of rental income was not deliberate.
HMRC failed to provide sufficient evidence of deliberate behaviour, despite inconsistencies in Mr. Ives' statements.
Mr. Ives is taxable on profits from his son's girlfriend's rental payments for Fullbrooks.
Rent-a-room relief did not apply as Fullbrooks was not Mr. Ives' main residence.