Shaun Harte v The Commissioners for HMRC

30 May 2024

[2024] UKFTT 493 (TC)

First-tier Tribunal

Mr. Harte was accused of underpaying taxes. The court decided he did make some mistakes on purpose, some by accident, and some because he wasn't fully aware of the rules. Because of this, the court lowered the amount of tax he had to pay.

Key Facts

•Shaun Harte (Appellant) appealed HMRC decisions concerning income tax, VAT, and penalties for tax years 2009-2016.
•HMRC issued a closure notice and discovery assessments for underdeclared income tax, a belated notification penalty for VAT, and penalties under Schedule 24 Finance Act 2007.
•The underdeclaration stemmed from undeclared income from Tasca Tankers Limited (TTL), personal expenses paid by TTL, unidentified bank deposits, and incorrect capital allowances/home office expense claims.
•HMRC applied a presumption of continuity, assuming similar errors across the relevant tax years.
•The Appellant conceded some underdeclaration, claiming carelessness but not deliberate conduct.
•Key disputes concerned the taxability of specific receipts, the characterization of TTL credit card expenses, entitlement to capital allowances and home office deductions, the nature of the Appellant's conduct, the applicability of extended time limits, and the existence of a reasonable excuse for belated VAT notification.

Legal Principles

HMRC bears the burden of proving a relevant discovery and that the loss was due to deliberate or careless conduct.

HMRC v Raymond Tooth [2021] UKSC 17

Sections 29, 34, and 36 TMA govern discovery assessments, ordinary time limits, and extended time limits for careless or deliberate conduct.

Taxes Management Act 1970

Section 50(6) TMA allows for assessment reduction if overcharge is proven.

Taxes Management Act 1970

In discovery assessments, the taxpayer can demonstrate that the assessed amount is excessive.

Hurley v Taylor [1999] STC 1; Hargreaves v HMRC [2016] EWCA Civ 174; Hargreaves v HMRC [2022] UKUT 34 (TCC); Mullens v HMRC [2023] UKUT 244

For extended time limits under section 36 TMA, HMRC must show a loss of tax brought about by careless or deliberate conduct.

Mullens v HMRC [2023] UKUT 244

A reasonable excuse for failing to register for VAT is determined objectively based on the taxpayer's attributes and situation.

Perrin v HMRC [2018] UKUT 156 (TCC)

Outcomes

Appeal partly allowed.

The Tribunal found some income was deliberately underdeclared, some errors were careless, and some were made despite reasonable care. The Tribunal adjusted assessments based on these findings and applicable legal principles.

Income tax assessment reduced from £560,589.39 to £107,344.34.

Based on factual findings about income sources and conduct, the Tribunal determined the correct assessable income.

Inaccuracy penalties reduced from £336,353.61 to £58,089.38.

Penalties were adjusted based on the classification of errors (deliberate, careless, reasonable care) and the application of Schedule 24, Finance Act 2007.

Belated notification penalty for VAT reduced from £54,609 to £21,642.12.

The Tribunal found no reasonable excuse for the late VAT registration, but adjusted the penalty based on the corrected income and VAT liability.

Shaun Harte v The Commissioners for HMRC

Key Facts

Legal Principles

Outcomes

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