Selection of recent Tax Tribunal Cases

April 2024 – June 2024

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

Being in prison does not negate liability for income tax

Case details: Stanley Augustine Herrman V HMRC [2024] TC09132

In response to HMRC raising discovery assessments and penalties for the 2002-03 and 2004-05 to 2017-18 tax years, Mr Herrman’s appeal against the assessments included the point that, as he was in prison between December 2002 to December 2012, he should not be chargeable to income tax. In addition, that as he had hired an agent to deal with his affairs whilst in prison, he had assumed that any associated tax matters were being addressed.

Mr Herrman acknowledged that he had purchased three properties, one in 2002 and two in 2001 for which he had received rental income, and all were purchased prior to him being incarcerated. However, Mr Herrman contended that as he was not allowed to conduct business from prison that he should not be liable for income tax for this period. Furthermore, that he had appointed an agent to deal with his properties whilst in prison and therefore had presumed the agent would deal with any tax matters. The agent in question was an estate agent and the tribunal found that there was no evidence provided that the agent had been engaged to deal with Mr Herman’s tax affairs.  

The tribunal found that Mr Herrman had a liability to income tax which he should had notified to HMRC and that as he had not taken any steps to establish what his tax obligations were that his action was negligent and HMRC were able to use their powers to extend the time limit for issuing assessments. Furthermore, the tribunal concluded that being in prison does not exempt an individual from a tax liability. All the appeals were dismissed.

Information on invoices was sufficient to satisfy VAT claim

Case details: Fount Construction Limited V HMRC [2024] TC09144

The company appealed against HMRC’s decision not to allow a recovery of input tax on the basis that certain invoices did not meet the relevant legislative requirements. The VAT amount totalled £15,218.59.

The invoices in question contained the description of “Building Works at the above” and contained a box entitled “Job address” which contained the address for the building site in question.  HMRC’s view was that there was insufficient information on these invoices and therefore it did not allow HMRC to assess or determine the rate of VAT due.

The company contended that an invoice could contain a simple description and “did not need a novel” for it to be valid.

The tribunal agreed with the company and found that the invoices were compliant with regulation 14 of the VAT Regulations and therefore allowed the appeal.

Special reduction did apply to penalties

Case details: Gareth Bezant V HMRC [2024] TC09167

The appellant, Mr Bezant appealed against late payment penalties issued by HMRC regarding the 2021-22 tax year which was paid 232 days late on 20 September 2023 and should have been paid on 31 January 2023.

Mr Bezant did not dispute that tax was due for the 2021-22 tax year and that it was paid late but argued that he had a reasonable excuse for the late payment as he was unaware that his income would exceed the high child benefit charge due to the benefits he received. In addition, it was also argued by Mr Bezant that the Paper Notice he received dated 22 June 2023 informing him of the need to complete a tax return advised that penalties would be due only if he submitted his return and paid the tax owed later than 3 months within the date of the notice letter. The tax return was filed on 31 August 2023 and the tax paid on 20 September 2023 both within the 3 months’ timeframe. 

The Tribunal found that special circumstances did apply in relation to the contents of the Paper Notice against those in the Proforma Notice provided by HMRC which was a relevant factor that HMRC had not been considered and that in the particular circumstances it was not appropriate to impose late payment penalties and the appeal was allowed in full.

Conditions for valid penalty not evidenced

Case details: Imran Majid V HMRC [2024] TC09189

The appeal concerns failure to notify penalties raised by HMRC as the appellant – Imran Majid had failed to notify HMRC of a tax liability due arising from rental income received. The outstanding tax liability was not under appeal.

The appellant did not attend the hearing although a witness statement had been submitted and whilst the tribunal noted that the explanations provided by the appellant were in part incredible and in part contradictory to allow it to decide whether he had a reasonable excuse, the appeal was nevertheless allowed.

The tribunal found that HMRC had failed to meet the burden of proof in relation to the calculation of the penalty. HMRC had withdrawn the witness statement prepared by the original officer and replaced it with a new statement from a different officer which the tribunal considered to be less detailed and incomplete and one which provided no evidence as to how the penalty had been calculated.