Mr A C Haskins v Her Majesty's Revenue & Customs, SPC 00726

Spc00726

Income tax - Errors in Return - Appeal against reconstructed Assessment made by HMRC - Appeal allowed in part

MR A C HASKINS Appellant

• and –

Special Commissioner: HOWARD M NOWLAN

Sitting in public in London on 31 October 2008

The Appellant failed to attend the hearing and was not represented

Brian Skelley, and Graham Conway, both of HMRC. for the Respondents

© CROWN COPYRIGHT 2008

Introduction

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.

The prelude to 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.

The background facts

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 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. For the purpose of this appeal, the only significance of the claimed distinction was the issue of whether tax had been deducted, or at least whether tax should have been deducted under the PAYE machinery from the figure returned as his gross employment income.

The Appellant's Tax Return figures

7. The figures on the Appellant's Tax Return for the period ending 5 April 2004 disclosed gross income in respect of his Schedule D trade of £21,411. He ended up with only a profit of £8,280 since he claimed deductions for £2114 in respect of "costs of sales" (the nature of which was never clarified), £1250 in respect of unidentified "premises costs", £166 for repairs, £500 for "general admin", £1800 for motor expenses, £420 for "travel and subsistence" £300 for advertising and promotion, £411 for legal expenses, £4,000 in respect of a bad debt and £900 for "other...