Watson v Revenue and Customs (INCOME TAX/CORPORATION TAX : Penalty) [2016] UKFTT 729 (TC) (28 October 2016)

Watson v Revenue and Customs (INCOME TAX/CORPORATION TAX : Penalty) [2016] UKFTT 729 (TC) (28 October 2016)

The appellant failed to provide sufficient evidence to support the claimed expenses, did not retain or reconstitute records, and did not discharge the burden of proof to displace the assessments. HMRC's restriction of allowable expenses to 20% of turnover was fair and reasonable. The inaccuracies in the returns were due to the appellant's failure to take reasonable care, justifying a 30% penalty on the additional duties assessed.

Citation
[2016] UKFTT 729 (TC)
Parties
Appellant: David Watson; Respondents: The Commissioners for Her Majesty’s Revenue & Customs
Jurisdiction
United Kingdom
Judgment Date
28 October 2016
Procedural Posture
Income Tax/corporation Tax Penalty Appeal / First Tier Tribunal (tax Chamber) Decision
Outcome
Appeal allowed in part; assessments and penalties reduced but not cancelled.
Legal Topics
Income Tax, Corporation Tax, Self Assessment, Penalties for Inaccurate Returns, Discovery Assessment, Allowable Expenses
Tax Law Income Tax Corporation Tax Self Assessment Penalties for Inaccurate Returns Discovery Assessment Allowable Expenses

Case Brief

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Parties

David Watson

Appellant

The Commissioners for Her Majesty’s Revenue & Customs

Respondents

Procedural Posture

Income Tax/corporation Tax Penalty Appeal / First Tier Tribunal (tax Chamber) Decision

Legal Issues

  1. 1 Whether the appellant understated profits from self-employment for tax years 2008-09 and 2009-10
  2. 2 Whether the appellant’s claimed expenditure should be accepted
  3. 3 Whether HMRC correctly imposed penalties for incorrect returns and in what amount

Ratio Decidendi

The appellant failed to provide sufficient evidence to support the claimed expenses, did not retain or reconstitute records, and did not discharge the burden of proof to displace the assessments. HMRC's restriction of allowable expenses to 20% of turnover was fair and reasonable. The inaccuracies in the returns were due to the appellant's failure to take reasonable care, justifying a 30% penalty on the additional duties assessed.

Court Disposition

Appeal allowed in part; assessments and penalties reduced but not cancelled.

Orders

  • Allowable expenses restricted to 20% of turnover for each year.
  • CIS tax credits reinstated as agreed.