In D Lyth v HMRC [2017] TC05994 the First Tier Tribunal (FTT) held that failure to declare a capital gain on the taxpayer’s Return was careless rather than deliberate.


  • On 30 April 2010 and 11 July 2010 Mrs Lyth disposed of shares in a private company, by which she was employed, realising a capital gain
  • These were not included on the 2010/11 Return, which she filed herself
  • HMRC charged a penalty on the basis that as an FCCA and experiences finance director she knew the disposals needed to be included thus the inaccuracy was deliberate. Allowing 100% abatement for cooperation the penalty was set at 35%


  • At the time of the sale, Mrs Lyth set aside funds (in her husband’s name) to meet the capital gains tax liability
  • In April 2011 Mrs Lyth was diagnosed with depression
  • Mrs Lyth resigned her role in the company in Spring/Summer 2011


  • Mrs Lyth’s professional background was in industry, so she was not familiar with tax returns other than the aspects she dealt with every year on her own Return
  • It was plausible that, while able to deal with the complex areas of the Return that she dealt with every year, her depression meant she had simply not considered the gain when preparing her Return.
  • Hence, on the balance of probabilities, Mrs Lyth did not file the Return in the knowledge that it was inaccurate nor did she choose consciously to not find out the correct position.
  • HMRC did not discharge the burden of proof to show the Return was inaccurate.
  • The penalty was reduced to the minimum for a careless error, 15%


This is just one of a number of recent cases where HMRC have taken a harder line on a professional in the financial or legal sector.

We also note that mental health issues are often raised as a defence in penalty cases. If you are suffering from problems that affect your ability to keep up to date with taxes, it is a good idea to have a doctor's note in order to provide evidence of your condition: it is difficult without such evidence for HMRC to judge the severity of any problem or the dates on which it affected you.


Dorothy Lynn v HMRC [2017] UKFTT 0549 (TC)

Our guide on penalties