Sunday Salokun v The Commissioners for HMRC
[2023] UKFTT 962 (TC)
John Beesley & Anor v The Commissioners for HMRC
25 July 2023
[2023] UKFTT 650 (TC)
First-tier Tribunal
The Beesleys didn't pay enough CGT on their house sale because their accountant made mistakes and missed deadlines. The judge sided with the tax man, saying the mistakes were careless, not intentional, but still meant the Beesleys owed the money and penalties.
Key Facts
- •Discovery assessments issued to John and Janet Beesley for £31,498.10 and £32,043 respectively for Capital Gains Tax (CGT) on the disposal of a jointly owned property.
- •Penalties issued under Schedule 24 Finance Act 2007, reduced on review to £4,806.45 and £4,724.71 respectively.
- •Appellants claimed deductions related to a personal guarantee of £152,061.
- •HMRC argued that the claimed deductions were not allowable under section 38 TCGA and section 253 TCGA.
- •Appeal was heard on the papers due to appellants' failure to provide hearing dates.
- •Appellants' agent consistently misunderstood CGT principles and failed to provide sufficient evidence to support claims.
Legal Principles
Only sums allowable as deductions from the proceeds of a sale are the purchase price, incidental costs of purchase, incidental costs of sale, and expenditure wholly and exclusively incurred on enhancing the property.
Section 38 TCGA
For a valid claim under section 253(4) TCGA (loans to traders relief), a qualifying loan must exist, and the payment under the guarantee must have been made within four years of the end of the year of assessment.
Section 253 TCGA
A loss cannot be carried back to an earlier year of assessment.
Section 2 TCGA
A penalty is chargeable if an inaccurate return leads to an understatement of tax liability and the inaccuracy was careless or deliberate.
Schedule 24 Finance Act 2007
Reliance on an incompetent advisor is generally not a reasonable excuse for missing statutory deadlines or for inaccuracies in tax returns.
HMRC v Katib [2019] UKUT 189 (TCC)
The standard for judging reasonable care is that of a prudent and reasonable taxpayer.
David Collis v HMRC [2011] UKFTT 588 (TC)
Outcomes
Discovery assessments upheld.
Appellants failed to demonstrate allowable deductions under section 38 TCGA and section 253 TCGA. The agent's misunderstandings of CGT law and lack of evidence were key factors.
Penalties upheld.
Inaccuracies in the tax returns were due to careless behaviour by the appellants' agent. Reliance on the agent's incompetent advice was not a reasonable excuse for the inaccuracies (following Katib).