In Kevin Fearon v HMRC [2018] TC6818 the FTT rejected an appeal against four years of tax assessments and penalties for incorrectly claimed subsistence expenses. The errors were deliberate and 56% penalties applied.

  • Mr Fearon was an IT consultant working via his personal service company, IRK River IT Ltd.
  • HMRC opened an enquiry into his 2012/13 return and discovered that he had overclaimed subsistence expenses.
  • The claims had been credited to Director’s Loan Account and the amounts drawn out by the director. HMRC treated them as under-declared director benefits.
  • The enquiry was extended to 2011/12 and 2013/14.
  • Applying the Presumption of Continuity (i.e. that if a couple of years are wrong, the chances are the error persisted in previous years), HMRC raised Discovery assessments for 2010/11 to 2013/14 for £13,810 in undeclared income under self assessment.
  • HMRC also levied 56% penalties for Error under Schedule 24 FA 2007 of £7,731

The taxpayer appealed. He claimed that his accounts were wrong and had been corrected by his accountant and that his personal tax returns should have been corrected.

The First Tier Tribunal noted that:

  • The company had not filed correct accounts: there was no excuse for the errors, and it noted that every item of subsistence chosen for spot checks was found to be incorrectly claimed.
  • It agreed with HMRC that the errors were deliberate rather than careless. 

It confirmed that the assessments are valid.


HMRC could presumably have also fined the company for failure to report benefits

Useful guides on these topics

The tax term for food and drink: special rules apply for PSCs.

Personal Service Companies (PSCs)
Tax issues for your typical single director/shareholder company.

Discovery Assessments
When and how can HMRC raise a discovery assessment: what conditions must be met? 

Penalties for error and mistake
A tax-geared penalty will apply in one of three circumstances that result in a potential loss of tax

How to appeal an HMRC decision
A note summarising the key steps in appealing a decision of HMRC

How to appeal a tax penalty
Top tips on the process for appealing a tax penalty

 External links

Kevin Fearon v HMRC [2018] TC6818