15 October 2024
In this case, the tribunal examined tax assessments raised by HMRC against Mr Wyatt for the tax years 2007/08 and 2009/10. HMRC claimed that Mr Wyatt was not easily able to ascertain whether the amount deriving from property development activities should be charged to income tax or capital gains tax, so raised assessments to cover both taxes, effectively charging Mr Wyatt twice for the same receipt.
When the case was finally brought to the First-tier Tax tribunal, the Judge ruled in Mr Wyatt’s favour, claiming that the assessments issued by HMRC were invalid. This was because assessments issued under Section 29 of the Taxes Management Act, the “discovery” provisions, should not exceed the amount the officer actually believes to be due, as otherwise the taxpayer is compelled to enter into the appeals process rather than having the option to accept the assessed figure.
Interestingly in this case, HMRC identified the over-assessment and brought it to the tribunal’s attention and issued new assessments less than a fortnight before the hearing. The Judge decided that HMRC’s assessments were not valid and went so far as to mention its powers to make an order for costs against HMRC for acting unreasonably (which HMRC may make representations against). This was on the basis that HMRC raised invalid assessments many years ago and only spotted the issue and sought to remedy it shortly before the hearing.
This case highlighted the importance of taxpayers checking all tax assessments they receive carefully. HMRC can make mistakes, just like everyone else, and taxpayers shouldn’t feel hopeless when faced with inaccurate assessments.
It also serves as a reminder that HMRC must operate within strict limits when issuing assessments, and cannot over-estimate amounts, instead the assessment should be raised for no more than the possible tax liability.
It is easy to assume that assessments issued by HMRC are based on solid grounds, but this case highlights that the taxpayer does have the ability to appeal. It is crucial to get professional advice if you feel that an assessment is inappropriate, because despite the appeals process sometimes being lengthy, the outcome can be worth it as shown in this case. Taxpayers have the right to ensure that they are treated fairly – and the tribunal system exists to ensure that this is upheld.