In an unusual move, the First Tier Tribunal (“FTT”) agreed to give this taxpayer, “Mr E”, anonymity after he persuaded the judge that his extended family, who lived in a foreign country, would have their lives put at risk if his name was revealed as they had sent him large amounts of money 'secretly'.
Mr E, who had no legal representation, came to the UK over 40 years ago as a student, said his extended family lived in a country 'with a poor record regarding human rights' and the fact they sent him hundreds of thousands of pounds over the last few decades could be a problem.
The tribunal allowed his anonymity claim despite tribunal judge Anne Fairpo stressing that 'open justice' was important. The tribunal ruled: 'In the circumstances of this particular case we considered that this risk (to the extended family) outweighed the principle that justice should be done in public.'
Mr E will however face a substantial tax bill for failing to register for income tax. Mr E failed to pay tax for nearly two decades until HMRC caught up with him. HMRC opened an investigation in June 2018 and issued discovery assessments on 4 March 2020.
The assessments (under s29 Taxes Management Act 1970 (“TMA 1970)” for the tax years 2000/2001 to 2018/2019 and associated penalties (under s7(8) TMA 1970 and Schedule 41 Finance Act 2008 (“FA 2008”). The amount under appeal was £204,775.93. After alternative dispute resolution (“ADR”), HMRC reduced the tax and penalty bill to £158,979.39
Mr E had failed to notify HMRC he was chargeable to tax, and kept no business records for almost two decades, despite owning two takeaway businesses.
Among a host of reasons for his failure to pay taxes, Mr E claimed that 'he did not want to be a burden on the state and believed that if he filed a self-assessment return, he would receive state benefits, so he had not submitted any tax returns'; and also asserted that 'if his turnover was below the VAT threshold there was no obligation for him notify HMRC that he was liable to income tax'.
Blaming HMRC and the government, Mr E contended that 'he was being punished for deciding not to rely on social security, having saved taxpayers from having to support him and his children'.
Having heard endless excuses from Mr E, the FTT determined that his behaviour was clearly 'deliberate'. There were no business records and large amounts of cash sent by foreign relatives could not be identified in Mr E's bank accounts. The transactions for the takeaways were not produced for HMRC or the FTT.
The FTT agreed with HMRC that it is not credible that a person who has been in the UK for several decades would reasonably believe that there was no need to register with HMRC when starting a business, even if trading below the VAT threshold (noting that this has been consistently substantially higher than the personal allowance for income tax).
The FTT concluded that Mr E's behaviour was deliberate, as he chose not to file tax returns with HMRC. It concluded that there was no reasonable excuse for this and no special circumstances applied.
The appeal was dismissed . Rightly, Mr E was left facing a tax bill of £158,979.39. Some might observe that an average bill of just over £8,800 per annum is light justice.
Peter Nichols FFA FTA FIPA Cert PFS
Tax Director – BFN Accounts & Tax Limited