Selection of recent Tax Tribunal Cases

April 2025 – June 2025

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

HMRC failed to provide sufficient evidence

Case details: WG Recruitment Ltd V HMRC [2025] TC09486

WG Recruitment Ltd (WGL), a recruitment agency appealed against four default VAT surcharges raised by HMRC. At the hearing the HMRC officer identified four issues that he considered were relevant to the appeal. These being whether the surcharges had been correctly assessed, whether the Appellant had a reasonable excuse for the defaults alleged, whether the surcharges were disproportionate and delivery of the surcharge liability notices.

The tribunal asked the HMRC officer what evidence there was that any notice had been issued to WGL. The officer advised that WGL had not raised the issue of non-delivery of the notices and that there is a statutory deeming that the notices have been properly serviced, as noted in HMRC’s submission. The office explained further that HMRC outsource the sending of documents, and they do not request confirmation of receipt of the documents until a taxpayer alleges non-receipt.

The tribunal advised that regardless of the fact whether WGL had challenged the delivery of the notices, it was uncomfortable proceeding on the assumption that the notices had been posted. HMRC requested an adjournment to obtain further evidence however this was refused by the tribunal.

The tribunal found that HMRC had failed to meet its burden of proof regarding the service of the notices and allowed the appeal.

Director’s loan account was still in place

Case details: Gary Quillan V HMRC [2025] TC09487

Mr Quillan, the sole director of BOH Investments Limited a company in insolvency, appealed against a closure notice issued by HMRC who considered £145,058.66 was outstanding for the 2018-19 tax year on the overdrawn balance of the director’s loan account.

At the time of the appointment of a liquidator, the director’s loan account within BOH Investment Ltd was overdrawn by £439,954. The liquidator sent a demand for Mr Quillan to pay the outstanding balance and following the threat of legal action, Mr Quillan offered £57,500 to settle the remaining balance.

Mr Quillan paid £57,498 and the liquidator’s final account noted that, no further funds were expected and £382,456 of the loan remained outstanding at the time the company was dissolved.

HMRC considered that there should be a tax charge which arose under s415 ITTOIA 05 relating to the director’s loan account, on the basis that the loan was written off.  Mr Quillan was of the view that the loan was never formally written off or released and therefore no tax was outstanding.  Furthermore, that if the loan was written off it would have occurred in the 2017-18 tax year and not in the assessment period of 2018-19.

The Tribunal concluded that the director’s loan account balance was neither written off nor released and therefore there was no basis for the assessment raised by HMRC and allowed the appeal. 

Dangers of using AI to produce the statement of case

Case details: Bodrul Zzaman V HMRC [2025] TC09520

This case relates to a discovery assessment issued by HMRC to Mr Zzaman in respect of the High Income Child Benefit Charge for the 2018-19 tax year.

Mr Zzaman represented himself and confirmed that his written statement of case had been prepared with the assistance of AI. The statement set out several grounds on which he believed his appeal should succeed.

The Tribunal judge whilst acknowledging the passion and eloquence with which Mr Zzaman put forward his arguments, found that certain aspects of the grounds of his appeal were unclear and that the tax cases quoted to support these grounds were not relevant and did not help his appeal.  

It was noted that whilst some of the cases cited in Mr Zzaman’s statement was inaccurate, the use of AI did not appear to have resulted in the quoting of fictitious cases. The judge commented that ‘this highlights the danger of reliance on AI tools without human checks to confirm that assertions the tool is generating are accurate.’  

After reviewing the facts of this case, the tribunal found that the assessment was validly issued in the correct amount and dismissed the appeal.