A taxi driver was unable to account for income and expenditure for 2 out of 233 days in 2002/03. Was there negligence?

HMRC concluded that this lack of record keeping did amounted to negligence. It also claimed that the taxi driver, Mr Ho had made four journeys in and out of Heathrow each day instead of the two he claimed and also estimated that the taxpayer had different levels of personal expenditure than he had submitted

The First Tier Tribunal found the taxi driver Mr Ho to be a good witness and that on the balance of probabilities that he failed to declare 2 days receipts and expenditure in 2002-3 due to the accidental loss of the receipts. It found that this was insufficient to amount to negligence.

It also found that four journeys per day were unlikely because as a London taxi driver Mr Ho could not reject short journeys if they had been requested and so it would have been very difficult to pick up passengers for Heathrow from the street. Mr Ho's journeys also tallied up to tags issued by the airport authority. HMRC’s cashflow tests were also rejected. 

Clutching at straws?
For HMRC a key issue in any enquiry is whether it can "break" the records and prove that bookkeeping is inadequate and, when it comes to a cash business a cashflow test must also add up. In this case the Tribunal agreed that the lost receipts were due to genuine error and this was not on its own enough to suggest negligence nor break the records. HMRC also ignored information given to it during the enquiry and so this meant that its cashflow test was unreliable. Mr Ho was successful in his appeal.


Stephen Ho v Revenue & Customs [2010] UKFTT 387(TC)