First-tier Tribunal (Tax)

[2010] UKFTT 42 (TC)

TC00356

Appeal number TC/2009/11662

INCOME TAX – enquiry into tax return – closure notice amending self assessment – no evidence supporting claimed expenditure – section 50 Taxes Management Act 1970 – determine appeal on facts allowing some of expenditure claimed

FIRST-TIER TRIBUNAL

TAX

                                                VICTOR KINSEY                               Appellant

                                                                      - and -

                                 THE COMMISSIONERS FOR HER MAJESTY’S

                                       REVENUE AND CUSTOMS (Income Tax)    Respondents

                                                TRIBUNAL: Nicholas Aleksander (Tribunal Judge)

                                                                        MM Hossain FCA FCIB

Sitting in public in London on 13 January 2010

Lynne Ratnett, officer of HM Revenue and Customs for the Respondents

The Appellant having failed to attend the hearing but the Tribunal being satisfied that reasonable steps had been taken to notify the Appellant of the hearing and that it was in the interests of justice to proceed with the hearing.

© CROWN COPYRIGHT 2010

DECISION

1.     This is an appeal against amendments made by a closure notice to Mr Kinsey’s self assessment for the year 2004/5 following an enquiry by HMRC into his tax return for that year.

2.     Ms Ratnett represented HMRC.  Mr Kinsey failed to attend the hearing.  The Tribunal noted that notice of the hearing had been sent to Mr Kinsey at the address on the Tribunal’s records and had not been returned.  Ms Ratnett noted that there had been a recent change to Mr Kinsey’s address on HMRC’s records – but the change of address was after the date on which the hearing notice was dispatched.  The tribunal clerk telephoned Mr Kinsey, but only got a recorded message.  The Tribunal noted from the correspondence bundles before it that Mr Kinsey had a history of not responding to messages or correspondence.  Accordingly the Tribunal found that reasonable steps had been taken to notify Mr Kinsey of the hearing, and that it was in the interests of justice to proceed with the hearing in his absence.  Mr Kinsey has the right to apply to the Tribunal to set aside its decision, and Ms Ratnett stated that HMRC would not object to such an application if it were made.

3.     The Tribunal had before it a bundle of documents.

4.     HMRC enquired into Mr Kinsey’s tax return for 2004/5.  Various documents were requested to evidence Mr Kinsey’s claimed expenditure.  Mr Kinsey did not respond to such requests, and a formal request was made under section 19A Taxes Management Act 1970.  Despite the imposition of daily penalties for failure to comply with the request, Mr Kinsey still did not respond.  The enquiry was concluded by a closure notice dated 23 August 2007.  In the absence of any information or documents, HMRC’s conclusion was that not of the claims for costs to be set against trading income were allowable.

5.     Mr Kinsey appealed against the amendments to his self assessment made by the closure notice on 20 September 2007.  A meeting was held between Mrs Towers (HM Inspector of Taxes) and Mr Kinsey on 26 March 2008 in an attempt to settle the appeal.  Notes of the meeting were in the bundle of documents before us.  Following the meeting and further correspondence with Mr Kinsey, Mrs Towers wrote on 20 June 2008 proposing figures based on her best judgement on which she was prepared to settle the appeal.  These were to disallow £64,141 of double claimed expenditure, £4026 of premises costs that were privately used, £3713 of advertising costs in the absence of documentary evidence, and £3205 of bad debts in the absence of any supporting information.   Thus £75,085 in total of expenditure would be disallowed.  Mr Kinsey did not respond to this offer of settlement, but instructed a firm of accountants to represent him.  However, the accountants did not give any substantive response to HMRC’s settlement proposal, and on 13 May 2009 informed the Tribunal that they were no longer acting for Mr Kinsey.

6.     The only information and evidence that Mr Kinsey has provided to support his claimed expenditure was provided at the meeting with HMRC on 26 March 2008 or in subsequent correspondence.  All of these records were taking into account in the figures proposed by Mrs Towers in the proposals contained in her letter of 20 June 2008.  We are satisfied that the figures set out in that letter were based on her best judgement, and are fair and reasonable in all the circumstances.

7.     Accordingly we determine this appeal by disallowing £75,085 of expenditure claimed by Mr Kinsey in his tax return.  We determine that Mr Kinsey’s self assessment for the tax year 2004/5 be increased from a loss of £56,558 to a profit of £18,527.

8.     The hearing having taken place in the absence of the Appellant, the Appellant has a right to apply for this decision to be set aside.  The Appellant has a right to apply for permission to appeal against this decision.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this Decision Notice.

Nicholas Aleksander

TRIBUNAL JUDGE

RELEASE DATE: 22 January 2010