Thursday, 17 November 2016


Ouch! That's the pain of receiving a penalty assessment from the Inland Revenue (or HMR&C to be precise). But if the penalty relates to wrong information in a tax return or accounts which is down to your accountant or some other agent and you took reasonable care to avoid the inaccuracy then you should be able to get the penalty quashed.

In a case just before the tax tribunal, two taxpayers had been advised that they could claim the owner-occupier exemption for capital gains tax covering a rise in value over three years on the strength of living in the house for just three weeks between exchange of contracts to sell and the actual sale taking place. Now, the idea may sound surprising to you but the taxpayers believed it and they believed it because that is what their accountant told them. So they signed their tax return on that basis.

When the Revenue discovered this was nonsense, they decided to penalise the taxpayers in addition to claiming the extra tax payable. The penalty was £7,000 for one of them and £6,650 for the other. They appealed against the assessments and the tribunal has now quashed them.

The taxpayers had told the truth. The tribunal said that where a person seeks appropriate professional advice from somebody who is a professed expert in a particular area, it will almost always be reasonable for them to rely on it. That's provided the person giving the advice is seemingly competent and there are no indicators that they ought not to be relied on. It would have to be reasonably obvious that the expert was talking through the back of their head: something subtle or which would only be pricked up by a fellow professional expert won't be enough to sink the taxpayers.