In Kevin Fearon v HMRC  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
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