Tribunal Allows Taxpayers’ Appeal Against HMRC’s Excessive Delay

In the case of Clive Kingdon & Ors v HMRC [2022] UKFTT 407 (TC), the First-tier Tribunal (FTT) allowed the appeals of taxpayers against discovery determinations and penalties imposed by HMRC. The case centered around the company’s acquisition of a partnership business that occurred earlier than when HMRC believed it did.

Our taxation practice is the foundation of the firm. Have a conflict with HMRC? Our tax team is composed of knowledgeable tax lawyers who can help you handle your tax issues. For the best outcome, our ex-HMRC lawyers will advise you on intricate tax laws. We have years of expertise in dealing with complex tax problems, including negotiating with HMRC and handling tax appeals before Tax Tribunals and in the High Court.

History between Rota Rod and HMRC

The case involved income tax and was brought to the attention of the FTT in 2022. In 1993, three individuals, Clive Kingdon, Terry Stead, and Anne Kingdom established a partnership called Rota Rod. The following year, the partnership engaged the services of Christopher Lunn & Co (CLC) to act as its accountants. In 2003, the three individuals incorporated Rota Environmental Services Ltd (the Company) and transferred the partnership business to the company on the advice of CLC.

The Partnership’s return for 2005/2006 was amended by HMRC to reflect additional income earned by the partnership in that tax year. The taxpayers argued that the transfer of the partnership business to the company took place either on March 31, 2005 or April 1, 2005. Therefore, there was no partnership income for the 2005/06 tax year. However, HMRC believed that the transfer took place on August 2, 2005 and that the partnership’s profits between April 6, 2005 and August 1, 2005 should have been returned on the partnership’s return for that year. HMRC also imposed penalties on the taxpayers.

Delay caused by HMRC

The FTT remarked that in this instance, HMRC had excessively delayed the process. For instance, when the Company’s accountants wrote to HMRC in 2011, they did not hear back in a meaningful way until almost 7 years later, in February 2018. The Appellants’ oral testimony was of little use to the FTT because to the lengthy delay, and the documentation evidence was essentially nonexistent. 

The FTT stated that the Appellants were unable to recall all the specifics of the transfer due to the delay caused by HMRC, and as a result, were denied a fair trial. The documents that the Appellants used to support the earlier date of transfer were more recent than those that HMRC used. Therefore, such evidence was preferred to the HMRC-cited evidence. 

What did the FTT decide?

The FTT ultimately allowed the appeals of the taxpayers. The taxpayers submitted that the transfer of the partnership’s business took place in March/April 2005, while HMRC claimed it took place in August 2005. The FTT noted that there had been a significant delay on the part of HMRC in this case, which prevented the taxpayers from having a fair trial. The documents relied on by the taxpayers to demonstrate the earlier date of transfer were more contemporaneous than those relied on by HMRC and were therefore preferred. The FTT concluded that it was more likely than not that the transfer took place in March/April 2005.

Issues around delay and abuse of process have recently been revisited in the FTT. In this case, the FTT confirmed that it has jurisdiction to consider an argument of abuse of process on the basis of delay by HMRC. This decision may prompt other taxpayers to rely on such an argument in appropriate cases.

Download The Judgement here

Expert Tax Investigation Lawyers

If you need HMRC Tax Investigation advice, we are available to aid you at every stage of the HMRC investigation process. Members of our legal team have first-hand experience and knowledge of the internal workings of HMRC. We can provide you with the very best representation in negotiations with HMRC and defending all forms of HMRC fraud, tax inquiry, tax fraud investigation, criminal tax evasion and HMRC enquiries and investigations. Our team specialises in successfully challenging HMRC decisions and will assist you in every aspect of the investigation.

Our specialist Tax Solicitors and Barristers deliver expert technical knowledge, strong negotiation skills and respected advice, which can make a pronounced difference to eventual tax penalties, charges and liability.

We provide urgent advice and representation to clients from our unique expert team of established Tax and Duties specialist solicitors and barristers with a proven track record of delivering authoritative results. Just call us on 0207 1830 529, or email [email protected].

Want legal advice from Tax Solicitors on your case?

Our simple enquiry form goes immediately to our tax litigators in Middle Temple, London. Call us on +442071830529 from 9am-6pm.

Call Now Button search previous next tag category expand menu location phone mail time cart zoom edit close