Charles Collier & Anor v The Commissioners for HMRC
[2023] UKFTT 993 (TC)
Anthony Outram & Anor v The Commissioners for HMRC
15 July 2024
[2024] UKUT 203 (TCC)
Upper Tribunal
Two brothers were accused of deliberately underpaying tax using a complicated scheme. A lower court said they knew it was wrong, but a higher court disagreed. The higher court said the lower court focused on whether a reasonable person would have known it was wrong, not whether the brothers actually knew, which is what the law requires. The case will be heard again by a different lower court.
Key Facts
- •Anthony and Ross Outram appealed an FTT decision concerning deliberate inaccuracies in their 2005/06 tax returns.
- •The inaccuracies involved claiming losses from a tax avoidance scheme (Montpelier Arrangements).
- •The Appellants conceded the losses were not legitimately claimable.
- •The sole issue before the FTT was whether the extended time limit for discovery assessments applied due to deliberate conduct.
- •The FTT's original decision was amended, leading to a further appeal.
- •The Montpelier Arrangements were similar to schemes in *Thomson v HMRC* and *Sherrington v HMRC*.
- •The FTT found the Appellants' conduct was deliberate, leading to the appeal to the UT.
Legal Principles
Discovery assessments: Section 29 Taxes Management Act 1970 (TMA 1970) allows HMRC to make assessments if income was unassessed, assessments are insufficient, or relief was excessive. A discovery assessment can be made outside the usual four-year limit (s34 TMA 1970) if the tax loss was deliberately caused by the taxpayer (s36(1A) TMA 1970). Deliberate inaccuracy includes a deliberate inaccuracy in a document given to HMRC (s118(7) TMA 1970).
Taxes Management Act 1970
Deliberate inaccuracy: A deliberate inaccuracy occurs when a taxpayer knowingly provides HMRC with a document containing an error, intending HMRC to rely on it as accurate. This is a subjective test focusing on the taxpayer's knowledge and intention; not whether a reasonable taxpayer would have made the same error.
*Auxilium Project Management v HMRC* [2016] UKFTT 249 (TC)
FTT Rule 41: The FTT may review a decision if there's an error of law, notifying parties and giving them an opportunity to make representations before taking action.
Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009
FTT Rule 37: The FTT may correct clerical mistakes, accidental slips, or omissions at any time.
Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009
Appellate review of FTT reasoning: An appellate tribunal should read the decision fairly as a whole, avoid hypercriticism, and not presume that unmentioned evidence was ignored.
*DPP Law v Greenberg* [2021] EWCA Civ 672
Outcomes
Appeal allowed; case remitted to the FTT.
The Upper Tribunal (UT) found a material error of law in the FTT's application of the subjective test for deliberate inaccuracy. The FTT improperly relied on its own conclusions regarding the absence of a trade when assessing the Appellants' knowledge. The UT also addressed procedural issues related to the FTT's amendments to its original decision, finding that while some changes were permissible under Rule 41, others were not. However, these procedural errors were deemed non-material. The UT also determined that it could not itself decide the case based on 'blind eye knowledge' due to fairness concerns and lack of evidence.