The Tax Tribunal’s decision in the recent case of J R Hanson v HMRC dismisses the Revenue’s claim that the taxpayer should check professional advice.
On the advice provided by his accountants, Hanson submitted a tax return to include a claim for capital gains tax relief however, a subsequent enquiry from HMRC found that he was not entitled to the relief and required him to pay additional capital gains tax. It was considered that Hanson had not taken “reasonable care” and as such a further penalty of approximately £14,000 was levied against him. HMRC confirmed that an error by a professional adviser was still the taxpayer’s responsibility.
Hanson appealed on the basis that “reasonable care” could not include checking the accuracy of professional advice although HMRC defended its position by stating that a taxpayer must ensure that the advice received is correct.
The Tribunal Judge found for the taxpayer confirming that there had been carelessness on the part of the professional advisers. The penalty was cancelled after consideration of the facts, the accountants had acted for Hanson for many years and the advice requested was within their area of expertise. The judge made it clear that this would not apply to all professional advice, taxpayers should ensure that their tax returns are correct according to their own ability. Omitting a major source of income would be carelessness on their part whereas there would be no expectation for the taxpayer to challenge complex professional advice.
Careless errors made by accountants may result in the cancellation of penalties for the taxpayer however HMRC may further seek to impose the charges by using other provisions such as the Taxes Management Act 1970, s99 which relates to “knowingly incorrect” returns.
if you have been issues with a penalty assessment from HMRC and would like us to check it’s validity for you, please contact your local Burgis & Bullock office on the number below.