Isaac Aboagye Frempong v The Commissioners for HMRC
[2024] UKFTT 999 (TC)
Patrick Rodney Boden & Anor v The Commissioners for HMRC
23 May 2024
[2024] UKFTT 457 (TC)
First-tier Tribunal
A couple ran a business and didn't report all their income or keep proper records of expenses. The tax office found out and issued tax bills. The couple tried to argue they could use a simpler accounting method and that some of their money was owed but they couldn't prove it. The tax office's adjustments to their taxes were deemed fair, and the court dismissed the couple's appeal.
Key Facts
- •Mr and Mrs Boden, partners in Point Four, appealed against discovery assessments for 2011-12 to 2014-15.
- •Point Four provided services to family companies owned by the Bodens, issuing 'proforma invoices' but receiving no payment.
- •The Bodens used a cash basis of accounting, claiming expenses without receipts, based on internal rules.
- •HMRC discovered the loss of tax due to the omission of 'proforma invoice' amounts and excessive expense claims.
- •The Bodens did not file tax returns for the years in question.
- •HMRC's investigation uncovered discrepancies in mileage, subsistence, and hotel expenses claims.
Legal Principles
Discovery assessments under section 29(1) TMA 1970 can be made if an officer discovers a loss of tax due to non-notification of liability.
Taxes Management Act 1970
The time limit for issuing assessments is generally 4 years (section 34 TMA 1970), but extends to 20 years for deliberate tax loss or failure to file a return (section 36(1A) TMA 1970).
Taxes Management Act 1970
Partnership profits must be calculated using the accruals basis of accounting (section 25 ITTOIA 2005), unless the cash basis is permitted under section 25A ITTOIA 2005.
Income Tax (Trading and Other Income) Act 2005
Deductions for expenses are only allowed if incurred wholly and exclusively for the purposes of the trade (section 34 ITTOIA 2005).
Income Tax (Trading and Other Income) Act 2005
Bad debt relief (section 35 ITTOIA 2005) can only be claimed at the time the debt is considered bad, not with hindsight; the burden of proof is on the taxpayer.
Income Tax (Trading and Other Income) Act 2005, Jamie White v HMRC [2016] UKFTT 791 (TC)
Outcomes
The appeals against the assessments were dismissed.
HMRC validly discovered a loss of tax; assessments were issued within the statutory time limits; the cash basis of accounting was not available; expense claims were excessive and unsubstantiated; and no valid bad debt relief claim was made.