In Harold Wiesenfeld and Alex Strom v HMRC [2019] UKUT 0301 the UT upheld penalties for carelessness. The taxpayers failed to provide timely evidence as to the nature of their business venture in Poland and the tribunal ruled that verbal evidence amounted to hearsay.

  • The appellants claimed Income Tax Loss relief for a business venture in Poland.
  • HMRC discovered that the losses had been incurred not by the individuals but by their Polish company and denied the loss claim.
  • HMRC assessed Schedule 24 FA 2007 Penalties for Error, increased due to careless behaviour by the taxpayers.
  • The taxpayers appealed the penalties.

The parties' tribunal procedure did not go as intended.

  • Just before the First Tier Tribunal hearing HMRC amended its case in respect of penalties.
  • In accordance with the tribunal directions, the appellants provided witness statements however they were short and lacking in detail.
  • Before the FTT hearing, the appellants wished to admit a new witness. The witness could have corroborated their claim that they ran a partnership and that the loss making company held its assets on trust.

The FTT found that penalties were due and dismissed the appeal. They decided that the new witness’ evidence was inadmissible: it amounted to hearsay and was introduced without notice.

The taxpayers’ appealed to the Upper Tribunal (UT).

  • The UT found that the appellants had not registered a partnership in the UK , they had taken and had access to professional advice.
  • The appellants could have challenged HMRC’s application to change its case, but did not do so.
  • The additional verbal evidence did amount to hearsay and even if the UT did allow it would have ‘ambushed’ HMRC: evidence should have been presented in accordance with the tribunal directions.

Useful guides on this topic

How to claim, how to offset & restrictions

Penalties: Error or mistake in a tax return
How & why penalties are calculated

How to Appeal a Tax Penalty
Step by step guide to ensure that you appeal all the right things

Grounds for Appeal: Toolkit
It's vital to understand and correctly state your grounds for appeal

Grounds for Appeal: HMRC error
An error by HMRC can invalidate an assessment: this guide tracks key decisions on this ever changing topic.

Grounds for Appeal: Reasonable Excuse
What is a reasonable excuse and why is it important to consider whether you have one?


External links


 Harold Wiesenfeld and Alex Strom v HMRC [2019] UKUT 0301 (TCC)