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Selection of recent Tax Tribunal Cases

October 2023 – December 2023

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

Challenge to the validity of the discovery assessment made

Case details: Mr James Fera V HMRC [2023] TC08985

This case involved the High Income Child Benefit Charge (HICBC) which HMRC believed was due from Mr Fera, as his income exceeded the £50,000 threshold and his wife was in receipt of Child Benefit.

HMRC issued discovery assessments to Mr Fera on 15 March 2021 for the years 2016-17 to 2019-20 in respect of the HICBC. During the periods in question, Mr Fera was employed and paying his tax through the PAYE system and had never filed a self-assessment tax return.

On 29 March 2021 Mr Fera appealed to HMRC against the discovery assessments. HMRC consider that the discovery assessments were protected assessments, as the amendments introduced under section 97(5) FA 2022 did not apply because Mr Fera had not raised the issue of the invalidity of the discovery assessment (due to the assessments not relating to a discovery of income) and this issue was not subsequently raised by Mr Fera on or before 30 June 2021.

On reviewing the details of the case, the Tribunal found that the discovery assessments in question were not valid as they did not refer to the failure to include an amount of income in a return. The assessments referred to an amount of income tax that was due, however child benefit is not taxable income. Furthermore, the discovery assessments were not validated by section 97 FA 2022 because, in the Tribunal’s opinion, Mr Fera’s formal appeal to HMRC regarding the decision to charge HICBC was a challenge to the validity of the discovery assessments and this challenge was subject of an appeal notice given to HMRC before 30 June 2021.  The appeals were allowed.

Loss of tax not was not brought about deliberately

Case details: Charles Collier (1), CB Collier Partnership (2) V HMRC [2023] TC09004

HMRC had investigated the Appellants under the Code of Practice 9 regime into suspected tax fraud and raised several assessments and amendments, including penalties. Whilst the Appellants did not dispute that the amounts had been omitted from their returns, they contended that the omissions were brought about carelessly and not deliberately as maintained by HMRC.

The Appellants held the view, that as the assessments and amendments had been raised more than six years after the end of the year of assessment to which they relate, they were out of time. HMRC accepted that the burden of proof rested with them to demonstrate that the assessments and penalty determinations did meet the conditions regarding the extended time limits of 20 years.

The Appellants’ case set out how Mr Collier (who is dyslexic) relied upon a small group of professional advisers to assist with his businesses, which included the preparation and submission of both his personal tax return and Partnership returns. After several years of using the same accountant, who was well versed with the Appellants’ affairs, the Appellants found alternative advisers due to a decline in the standard of work provided by the accountant. The periods relating to the assessments were those covered by the original accountant’s work.

The Tribunal concluded that HMRC had failed to demonstrate that the tax loss was brought about deliberately and therefore the statutory conditions for making the assessment and amendments within 20 years were not met. The Tribunal allowed the appeal.

AI-generated fake tax tribunal cases to support taxpayer’s appeal

Case details: Felicity Harber V HMRC [2023] TC09010

The Appellant, Felicity Harber, appealed against a “failure to notify” penalty issued by HMRC relating to the failure to notify her liability to capital gains tax in respect of the disposal of a property. The penalty was appealed on the basis that she had a reasonable excuse because of her mental health condition and/or because it was reasonable for her to be ignorant of the law.

Harber, who was unrepresented, provided details to the Tribunal of nine First Tier Tribunal cases which included the names, dates, and summary of each case which she considered supported her position of a reasonable excuse due to mental health issues and separately those which supported the view of ignorance of the law.

However, none of the cases quoted was genuine and had, in fact, been generated by artificial intelligence (AI). It was accepted by the Tribunal that the appellant had been unaware that the AI cases were not genuine.

In reaching their decision, the Tribunal advised that they had not considered the Appellant’s reliance on the AI cases and stated that their decision would have been the same if she had not provided the cases. The Tribunal further commented that providing authorities which are not genuine and asking a court or tribunal to rely on them is a serious and important issue.

In deciding the appeal, the Tribunal applied the principles in Christine Perrin v HMRC and found that the Appellant did not have a reasonable excuse. The appeal was dismissed.  

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