Expenses Claimed Without Supporting Documentation On Tax Returns Leads To Rejection Of Repayment Claims

Overview Of Expenses Claimed Without Supporting Documentation

Expenses claimed without supporting documentation featured in the case of Bakery Badjie v Revenue & Customs [2023] UKFTT 537 (TC).

The taxpayer Mr Badjie (“the Taxpayer”) unsuccessfully appealed against four HMRC tax penalties issued under Schedule 24 of the Finance Act 2007.

The sums involved were modest but it is a case that shows how important it is to keep proper records of expenses to support a taxpayer’s claim and the limits to which you can rely upon an agent and or accountant when appealing to the Tax Tribunal.

Grounds of Appeal

The Taxpayer relied upon an agent but curiously it was suggested by HMRC he had no knowledge of the expenses claimed for him.

HMRC summaried the Taxpayer’s position suggesting that apparently he did not review the tax returns and was seemingly unaware of the claims until HMRC informed him about them. This position was not accepted by the Tax Tribunal as the Taxpayer had made five phone calls to HMRC chasing up the repayment.

It was also suggested by HMRC that the Taxpayer’s grounds of appeal included the suggestion that he had not afforded details of his expenses to the agent who had claimed them on the returns.

HMRC disallowed the expense claims and as a result, repayment claims were rejected by HMRC and penalties of £1,952.94 were issued.

The Taxpayer said his accountant was on vacation in Africa when he gave instructions.

HMRC said the Taxpayer was careless having failed to keep proper records for such expense claims. HMRC considered the claims were invalid.

It was suggested that the Taxpayer had been introduced to the accountant by his brother to obtain a tax refund.

HMRC decided this was prompted ie. not volunteered disclosure and represented around half of the income for each of the four relevant tax years. The Taxpayer had called HMRC on a number of occasions asking about the repayment and therefore HMRC said he knew the claims had been made.

Reliance On An Accountant

The Taxpayer saying he had relied upon an accountant was not accepted:

Finally the Upper Tribunal said the following in Christopher Ryan v Her Majesty’s Commissioners for Revenue and Customs [2012] UKUT 9 (TCC):

“6. …The penalty is imposed on the person concerned, and not upon his solicitor or any other representative. The purpose of the legislation would be defeated if a penalty could be escaped by the expedient of placing the blame on a dilatory solicitor. If Mr Ryan believes he has been let down by his solicitor, his remedy is to take the matter up with the solicitor.

Tax Tribunal Decision

The Tax Tribunal flatly rejected the appeal saying:

19    It is not enough for Mr Badjie to rely on his accountant even though it would appear that Mr Badjie did not in fact see the tax returns before his accountant submitted them. He clearly knew that as a result of his expenses claims he was due a refund of tax even though he did not have any receipts to support his expenses claim. This knowledge is confirmed by the fact that Mr Badjie made five telephone enquiries to HMRC chasing up his repayment. In addition, Mr Badjie admitted to HMRC on 20 May 2021 that he had “told the accountant what he spent and left it to the accountant to complete the tax returns.”

20    Mr Badjie was not ignorant of what was going on. He gave information to his accountant without any supporting documentation.

21    The Tribunal is unable to find any circumstances which would result in a special reduction.

The appeal is therefore dismissed and the penalties remain which have been correctly calculated.

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This page is not legal advice and should not be relied upon as such. This article Expenses Claimed Without Supporting Documentation On Tax Returns Leads To Rejection Of Repayment Claims is provided for information purposes only. You can contact us on the specific facts of your case to obtain relevant advice via a Free Initial Consultation.

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