Haskins v HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judgment Date | 04 December 2008 |
| Date | 04 December 2008 |
| Court | Special Commissioners (UK) |
special commissioners decision
Howard M Nowlan
The Appellant failed to attend the hearing and was not represented
Brian Skelley, and Graham Conway, both of HMRC for the Respondents
Income tax - errors in return - appeal against reconstructed Assessment made by HMRC - appeal allowed in part
A special commissioner dismissed in substance an appeal by a taxpayer against a reconstructed assessment made by the Revenue following an inquiry into his tax return where there was a lack of reliable evidence to support his appeal and establish that the assessment was wrong. However he made two adjustments to allow for expenses and in the light of a document produced by the taxpayer after the hearing of his appeal.
The taxpayer was a bookkeeper, operating in and around Bristol. He had a number of clients whom he invoiced. He was chargeable to income tax under Sch. D, Case I in respect of the profits from that activity. He indicated on his tax return for the period ending 5 April 2004 that he had also received employment income of £17,722, from which it was asserted that tax of £3,898.84 had been deducted. Whilst the identity of the employer was not disclosed on the return, it emerged later that the alleged employment was with one or both of two building companies. The taxpayer claimed that he had been employed from 4 May to 9 October 2004, when the companies went into liquidation.
There was no evidence as to whether the taxpayer's activity with the companies was rightly classed as an employment. It was not clear why some of his income was received in the course of his general trade, whilst £17,722 was allegedly paid, net of tax and National Insurance contributions on the basis that he was employed.
The Revenue made an assessment in which they took the gross turnover indicated by the schedule of invoices, namely £17,944, treated the claimed figure of employment income of £17,722 as further gross receipts for Sch. D purposes and disallowed all the expenses, and a claim for capital allowances. Thus an assessment was raised in the amount of £35,666. That was subsequently reduced to reflect the expectation that the alleged employment figure of £17,722 had never been received, but that instead the net figure of £12,400 had been received, and the higher figure was simply derived by grossing up the actual cash figures received, which totalled £12,400. On that basis the assessment was reduced to £30,344. The taxpayer appealed.
Whether the assessment was valid.
The special commissioner (Howard Nowlan) (allowing the appeal in part) said that the special commissioners had jurisdiction to confirm or amend the assessment made if they considered that it over-charged the taxpayer, albeit that the burden of proof in demonstrating that rested with the taxpayer. This case was unsatisfactory in a number of respects, including particularly in the present context the fact that the taxpayer chose not to attend the hearing, and appeared to have been focused entirely on the one question of whether he had been employed by either or both of the companies, and whether thus tax had been or should have been deducted in respect of employment income from those companies. The taxpayer appeared altogether to lose sight of the fact that his appeal also involved major questions concerning the computation of his gross turnover, and the admissible deductions in calculating net profits.
Not only had the taxpayer altogether failed to produce any evidence to sustain any claim to deduct anything, but he had produced various utterly conflicting figures, which gave rise to a total lack of confidence in anything he said. Bearing in mind that the taxpayer was a bookkeeper who had been assisted or hindered by support from an accountant, it could not be accepted that it had been impossible in a period of nearly three years to retrieve documents or re-create them, so as to do a better job of proving the entitlement to any deductions. In all the circumstances, the commissioner had decided that a figure of £3,000 should be conceded as a deduction for expenses because it was natural that the taxpayer would have incurred some expenses.
Since the hearing, the taxpayer had delivered, without comment or any explanation, what appeared to be a copy of a form P60 in respect of employment income from a company for the year ending 5 April 2004 of £9,679.78.
In all the circumstances, since the burden of proof was on the taxpayer to show that the reconstructed assessment made by the Revenue was wrong, and he had advanced no satisfactory evidence to establish that, the appeal was in substance dismissed. The tribunal would make two adjustments, one to concede an estimated figure of expenses of £3,000, which was agreed at the hearing with the Revenue representatives, and the other to make a further adjustment in the light of the copy P60 produced by the taxpayer.
1. This was a very unsatisfactory case. It revolved simply around the evidence, or rather the startling lack of reliable evidence, in relation to the income on the Appellant's Return for the period ending 5 April 2004. Although I have allowed the Appeal in part, the realistic way to express this is that since the burden of proof is on the Appellant to show that the reconstructed assessment made by HMRC is wrong, and he has advanced no satisfactory evidence to establish this, the Appeal is in substance dismissed. I have simply made two adjustments, one to concede an estimated figure of expenses of £3,000, which was agreed at the hearing with the representatives of HMRC, and the other to make a further adjustment in the light of one document produced by the Appellant that the Appellant had been seeking to locate prior to the hearing, and which he has delivered to HMRC since the hearing.
2. The hearing was preceded by a request for a postponement of the hearing by the Appellant. The Appellant claimed that he was hoping to obtain from the Official Receiver of one of two related companies (that I will refer to as "the Abbey Building companies") that had gone into liquidation, a crucial document that would establish that he had been regarded as an employee by one or both of the relevant companies, and which would also establish that one or other of the companies had deducted or at least had indicated that they had deducted tax from the employment income paid to the Appellant.
3. The request for the postponement was met by an immediate and detailed response by the Respondents, objecting to the application. This was on three different grounds. Firstly the Appeal had already been postponed, and the Respondents suggested that the request for a postponement was tactical. Secondly the Appellant had had a great deal of time in which to prepare for his appeal, and it was simply unacceptable for the Appellant to request a postponement when the Appeal had already been postponed from May to October. He had had ample time in which to prepare and provide evidence, and had to date provided virtually no satisfactory evidence. Thirdly, the Respondents were not remotely persuaded that the Appellant was going to find any evidence that he had been regarded as an employee by either or both of the Abbey Building companies. The Respondents had already verified amongst their own records that the Appellant had not been shown to be an employee of the Abbey Building companies on the returns that those companies had made of their total employees to whom employment income had been paid in the relevant year. Furthermore the respondents had also been notified by Moore Stephens, who had acted in relation to the liquidation of the companies, that they had seen no evidence that the Appellant had been employed by either of the companies, and ostensibly been paid any employment income under deduction of tax by either of the companies.
4. In response to the application for a postponement and the objections advanced by the Respondents, I issued an immediate Direction, indicating that the Appeal should proceed as arranged but that I would grant an adjournment during the hearing, should it emerge that further evidence might become available which would be relevant. In response to this the Appellant indicated that he would not be attending the Appeal. I had no hesitation in deciding not to re-visit the question of whether I should grant the adjournment, since I regarded the Direction that I had issued as entirely reasonable, and I regarded it as unacceptable that the Appellant should seek to undermine this approach by simply boycotting the appeal hearing.
5. The Appellant is a bookkeeper, operating it seems in and around Bristol. He had a number of clients who he invoiced, and was plainly chargeable to income tax under Schedule D Case I in respect of the profits from this activity. He indicated on his Tax Return for the period ending 5 April 2004 that he had also received employment income of £17,722, from which it was asserted that tax of £3,898.84 had been deducted. Whilst the identity of the employer was not disclosed on the Return, it emerged later that the alleged employment was with one or both of the Abbey Building companies. The Appellant claimed that he had been employed from 4 May to 9 October 2004, when the companies went into liquidation.
6. There was no evidence as to whether the Appellant's activity with the Abbey Building companies was rightly classed as an employment. In a curious way the Appellant had invoiced these companies on four occasions during the relevant tax year, generating gross income of £150, £5,300, £450 and £500, all of which income was said to have been received in cash, and all of which was assumed to have been received in the course of his Schedule D activity. It was not clear why some of his income was...
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