The FT reports that HMRC has been accused of making up figures to terrorise people by Judge Geraint Jones QC, who said a six-figure bill had been “plucked from the air” to frighten a taxpayer receiving incapacity benefit.
Judge Geraint Jones QC ruled in favour of the taxpayer who had appealed against a tax bill and penalties of £342,000.
The First Tier Tribunal heard that in 2018 HMRC had issued income tax assessments worth £272,840 against Sebastian Cussens, based on its belief that he was a sole trader buying and selling cheap second-hand cars.
HMRC alleged Mr Cussens had failed to declare trading profits between 2005 and 2016 and also issued him with penalties of £70,102. However, the tribunal heard that Mr Cussens, who represented himself with help from his 81-year-old father, had been in receipt of enhanced employment and support allowance. This benefit is paid to people unfit to work because of physical or mental impairments.
The judgment added that, based on observations at the hearing, the tribunal believed Mr Cussens “lacked the skill, ability and perhaps the understanding to deal with this appeal properly”. The judge acknowledged that Mr Cussens had failed to co-operate with HMRC and had not mentioned his health condition to them before the hearing. Nevertheless, the tribunal found fault with the basis on which HMRC calculated the bill issued to Mr Cussens, heavily criticising its assumption that he could have made a 50 per cent net profit margin as “wild, extravagant and unreasonable”.
The judgment noted that HMRC’s lawyer was unable to explain how the profit margin had been arrived at.
“It smacks of being a situation where, because the appellant had been uncooperative and was sticking his head in the sand, the respondents [HMRC] decided to issue assessments almost “in terrorem in a bid to persuade the appellant to engage properly in the matters under review,”
The judgment said:
“We have seen nothing whatsoever in the documentary evidence to suggest that any thought, consideration or analysis whatsoever was undertaken by either the [HMRC] assessing officer and/or the [HMRC] review officer to decide whether taking a net profit figure of 50 per cent of supposed turnover was or was not a reasonable basis upon which to proceed. We are firmly of the view that figure was simply ‘plucked from the air’.”HMRC said in response to the ruling:
“We are committed to treating all taxpayers with respect by taking individual circumstances into account. We are carefully considering the judgment.”Is HMRC pleasant plucker?
Tax does have to be taxing.
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