Selection of recent Tax Tribunal Cases

July 2024 – September 2024

Time for our latest round-up of some interesting recent First Tier Tribunal tax cases.

Public law not relevant to regulation 13 CIS appeal

Case details: The Oaks (Gatley) Limited v HMRC [2024] TC09233

The company appealed against regulation 13 determinations raised by HMRC regarding its failure to operate CIS on payments made to subcontractors for the tax years 2017-18 to 2019-20. An appeal was also lodged against late filing penalties in respect of CIS monthly returns.

The main grounds for the appeal centred on the company’s view that HMRC had failed to follow its own guidance, protocols and taxpayer safeguards when issuing the determinations, had not considered relief under regulation 9(4) condition B and that HMRC would in effect be collecting the same tax twice. The company’s view being that this raised the question of public law and whether it was entitled to rely on the legitimate expectation that HMRC would follow its stated guidance.

HMRC submitted that the Tribunal had no jurisdiction to consider public law matters in this case. The Tribunal agreed and concluded that public law matters had no role to play in this appeal. Both the regulation 13 determination appeal and late filing penalties appeals were dismissed.

The tribunal did note that taxpayers in similar situations to the company were not without protection as they are able to ask HMRC to withdraw a regulation 13 determination and give a regulation 9 in its place. If HMRC declined and the contractor considered that this was unreasonable, the contractor could seek judicial review. 

Taxpayer’s belief that filing and payment date were the same was reasonable

Case details: Hadleigh Cohen v HMRC [2024] TC09254

Mr Cohen sought permission to make a late appeal against a penalty charged by HMRC in respect of a late payment of tax and to also appeal against the late payment penalty.

HMRC on 5 February 2023 had issued a notice to Mr Cohen to file a 2021-22 tax return, the date for filing that return was 16 May 2023. Prior to receipt of this notice Mr Cohen had sought help from HMRC’s digital assistants as this was the first time, he had to complete a tax return. During this on-line conversation, he interacted with two different HMRC advisors, as he was disconnected during the initial interaction.

The first advisor informed Mr Cohen that he would not be charged a penalty if the return was submitted by 28 February 2023 and that penalties and interest would be charged if the payment was late. The second advisor advised he had 3 months to submit the return as his self-assessment was only set up on 26 January 2023, the difference between the filing date and the payment date was not discussed. Mr Cohen both, filed his tax return and paid the tax liability in full on 26 April 2023.

HMRC issued a late payment of tax penalty to Mr Cohen on 2 May 2023 and whilst Mr Cohen attempted to appeal the penalty on the same day he completed the wrong form. HMRC rejected the appeal as the incorrect form had been used and sent Mr Cohen the correct form although this was sent over a month after the original form had been completed. The correct form was completed and returned, and this was rejected by HMRC’s on the grounds that the appeal was late.

The tribunal firstly considered the late appeal aspect and after taking into account all the evidence allowed a late appeal to be made. Turning to the penalty for the late payment of tax, the tribunal found that Mr Cohen had taken actions that a prudent and reasonable taxpayer would have done by seeking guidance to comply with his tax obligations.  Furthermore, that it was reasonable for him to assume following his interact with HMRC’s digital platform that he had three months to both file his tax return and pay his tax liability. The appeal was allowed.

Taxpayer was not carrying on a trade adversely affected by Coronavirus

Case details: Ali Sadiq Jaafar v HMRC [2024] TC09279

The appellant Ali Sadiq Jaafar had been a self-employed minicab driver until he set up a limited company in September 2018. The company filed dormant accounts for the year ending 30 September 2019 and micro company accounts thereafter. Mr Jaafar’s agent also confirmed that Mr Jaafar had ceased self-employment on 30 September 2019.

During 2020, Mr Jaafar made three separate claims under the self-employed income support scheme, HMRC contended that Mr Jaafar was no longer self-employed and therefore was not entitled to the payments. HMRC raised assessments to recover these claims on the basis that the appellant did not carry on a trade that was adversely affected by the pandemic.

It was acknowledged by the Tribunal that being a director of a company does not preclude a person from also being self-employed but noted that it was for Mr Jaafar to show that he had met the conditions for the support payments, including evidence of any relevant self-employment.

After considering all the information provided, the Tribunal concluded that Mr Jaafar did not recommence self-employment nor did he have an intention to continue to carry on a self-employed trade in the 2020-21 tax year. Therefore, he was not entitled to the support payments and found that the assessments had been properly raised. The appeal was dismissed.

HMRC failed to demonstrate that valid discovery had been made

Case details: Juilan Lowe v HMRC [2024] TC09285

This case focused on the validity of discovery assessments issued by HMRC to Mr Lowe relating to the 2017-18 to 2020-21 tax years.

Mr Lowe using the services of Apostle an accountancy advice business claimed additional business expenses which he had paid for personally and which had not been reimbursed by his employer.

HMRC opened an enquiry into Mr Lowe’s tax returns as it considered that he had claimed deductible expenses which he was not entitled too. Following the receipt of the enquiry letter Mr Lowe on 15 February 2023 contacted HMRC via telephone and spoke with the assessing officer.  The assessing officer wrote to Mr Lowe on 11 April 2023 to inform him that they did not believe that his tax returns were correct and that assessments would be issued. Those assessments were issued on 11 April 2023. During the period of issuing the opening enquiry letter and issuing the assessments, no documents from either Mr Lowe or Apostle were sent to HMRC.

Reviewing the details of the case the Tribunal found that HMRC based the assessments on the fact that no supporting documents were provided to justify the expenses claim. However, there was no evidence that HMRC made any attempt to obtain evidence of the expenses claimed.

The Tribunal concluded that as HMRC has failed to provided evidence of the primary facts to enable the Tribunal to conclude or infer that either the subjective or the objective tests for making a discovery had been satisfied, that no valid discovery had been made and the appeal was allowed.