In The News

Just what is deliberate?

Article Date: 28 October 2019

Just what is deliberate?

In a recent case a taxpayer set himself up as a tax consultant specialising in the racing industry. In addition he bought and sold racehorses.

He described himself as a thoroughbred (horse) dealer.

He argued that losses which he made trading horses were tax allowable against other income. HMRC argued otherwise and the Tribunal found against him stating that he had failed to provide satisfactory evidence to substantiate his losses as tax allowable. Martin Redfern, Tax Advisor at ASE Plc and, unlike the taxpayer, someone who is not a racehorse enthusiast, stated that “the taxpayer in this case failed at the first hurdle; without evidence any claim made to HMRC will not be successful and end up in the “winners enclosure”.

The Tribunal was then asked to consider penalties in relation to the taxpayer “deliberately describing his activities in a misleading way” to circumvent proper tax analysis. Martin points out that ordinarily HMRC issues “penalties dependent upon the type of conduct which the court witnesses; careless, deliberate and both deliberate and concealed”. In this case the tribunal ruled that if a taxpayer makes a claim and the claim turns out to be inaccurate, that is deliberate conduct.

As Martin concludes, “how does this judgement offer a taxpayer a way in which to interpret the behaviour based regime in which HMRC seek to enforce penalties”. He adds that “it is to be hoped that the case will be rerun at a higher court with a different past the post result”

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