Smith v Revenue & Customs (Rev 1) [2010] UKFTT 92 (TC) (24 February 2010)

Smith v Revenue & Customs (Rev 1) [2010] UKFTT 92 (TC) (24 February 2010)

The tribunal held that the accounting practice adopted by the appellant's accountants, which delayed recognition of income and assets until customer valuation certificates were issued, did not comply with generally accepted accounting practice as required by accounting standards. There were no exceptional circumstances justifying departure from GAAP. The failure to properly recognise income and work in progress constituted negligent conduct, allowing HMRC to raise discovery assessments outside statutory time limits.

Citation
[2010] UKFTT 92 (TC)
Parties
Appellant: Leslie Smith; Respondents: The Commissioners for Her Majesty’s Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
24 February 2010
Procedural Posture
Appeal / Final Judgment
Outcome
Appeal dismissed
Legal Topics
Income Tax, Corporation Tax, Computation of Profits, Generally Accepted Accounting Practice, Negligent Conduct, Discovery Assessments
Tax Law Accounting Law Income Tax Corporation Tax Computation of Profits Generally Accepted Accounting Practice Negligent Conduct Discovery Assessments

Case Brief

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Parties

Leslie Smith

Appellant

The Commissioners for Her Majesty’s Revenue and Customs

Respondents

Procedural Posture

Appeal / Final Judgment

Legal Issues

  1. 1 Whether accounts were prepared in accordance with generally accepted accounting practice (GAAP)
  2. 2 Whether the appellant's accountants' conduct was negligent under section 29 and 36 TMA 1970
  3. 3 Whether HMRC could raise assessments outside statutory time limits due to alleged negligence

Ratio Decidendi

The tribunal held that the accounting practice adopted by the appellant's accountants, which delayed recognition of income and assets until customer valuation certificates were issued, did not comply with generally accepted accounting practice as required by accounting standards. There were no exceptional circumstances justifying departure from GAAP. The failure to properly recognise income and work in progress constituted negligent conduct, allowing HMRC to raise discovery assessments outside statutory time limits.

Court Disposition

Appeal dismissed

Orders

  • HMRC's discovery assessments for the relevant years are upheld
  • No penalty determinations against Mr Smith personally