In JT Quinns Limited & Queen-Rose Green v HMRC [2021] TC08338, disallowed personal expenses put through a company's books resulted in tax assessments for the company and its director, including a s.455 tax charge. The director's lack of understanding of the basic principles of finance and tax and reliance on her accountant meant that tax penalties were downgraded for careless rather than deliberate behaviour.

HMRC had opened enquiries into the tax returns of JT Quinns Limited (the company) and Mrs Queen-Rose Green (Mrs Green), a director shareholder of the company.

  • Information, such as copies of bank statements were requested and not provided and HMRC issued both with Schedule 36 notices then penalties.
  • Additional enquiries were opened into several years for both appellants with further Schedule 36 notices and penalties being issued when information was not forthcoming.
  • Almost five years from when the first enquiries were opened HMRC issued Discovery assessments and Closure notices covering several accounting periods and tax years plus further penalty notices.
  • The amounts assessed were:
    • For the company: £90,393 in tax and £61,163 in penalties.
    • For Mrs Queen-Rose Green: £33,105 in tax and £22,816 in penalties.
  • The company assessments related to amounts shown in its accounts for which Corporation Tax deductions had been claimed which HMRC either considered to be the personal expenditure of Mrs Green or for which they could find no evidence of actual payment.
    • This included cash withdrawals, repairs to and mortgage payments for personally owned properties, unsubstantiated travel expenses, employee wages, an insurance loss, an ‘education grant’ for Mrs Green’s daughter and one-off rent payments for the use of Mrs Green’s home.
    • The assessments included charges for s.455 tax on the overdrawn directors loan account of Mrs Green in respect of all of the above payments which were found to be her personal expenditure.
  • The assessments raised on Mrs Green related to underdeclared rental and employment income.
  • The company and Mrs Green Appealed against the amounts assessed as well as the validity of the closure notices, discovery assessments and penalties, but not the Schedule 36 notices.
    • They asked the tribunal to reduce the amounts included in all of the assessments.
    • Mrs Green sought to blame her accountant for any inaccuracies in her tax returns.

The First Tier Tribunal (FTT) dismissed all of the appeals, finding Mrs Green to be evasive, unreliable and inconsistent.

  • The closure notices were validly issued under para 32 Schedule 18 FA 1998. The enquiries were opened within the relevant time limits and the notices stated the conclusions drawn by the relevant officer and made amendments to the returns to give effect to those conclusions.
  • The discovery assessments issued to both appellants were largely valid:
    • There was an insufficiency of tax assessed on the taxpayers.
    • There was nothing in their tax returns which meant that at the time that the enquiry window closed, a relevant HMRC officer could have been reasonably expected to be aware of those insufficiencies based on the information available to them at that time.
    • The loss of tax for the company was careless, not deliberate and one of the discovery assessments issued was out of time and invalid.
    • Mrs Green’s ignorance of the law, lack of understanding about her own business structure, and reliance on her accountant meant that her behaviour was also careless and assessments relating to two tax years were out of time and invalid.
  • The penalties were valid, there were inaccuracies leading to an understatement of tax which were deliberate or careless. Once it was established that the appellants had been only careless the FTT significantly reduced the penalties from 70% less a 5% discount, to 29.25% (the company) and 30% (Mrs Green).
  • The FTT accepted all of the amounts assessed by HMRC.
    • The company could not produce sufficient evidence to show the amounts claimed had been paid or, where relevant, were not personal expenditure.
    • HMRC were correct to impose the s.455 charge where HMRC had shown that payments had been made to or discharged the obligations of, Mrs Green.
  • As the company had not operated PAYE on the employment income in question, Mrs Green was entitled to a tax credit for those payments meaning no further tax was due.


This case is a reminder of the implications when a company owner treats the business bank account as their own and takes no responsibility for their tax affairs, then compounds matters by refusing to engage with HMRC once enquiries are raised.

Useful guides on this topic

Close company loans toolkit (loans to participators)
This guide takes a detailed look at the Corporation Tax treatment when a Close Company makes a loan to a participator (director-shareholder). It also provides links to our guides for individuals on the making of loans to companies.

Directors' loan accounts: Toolkit (subscribers)
HM Revenue & Customs (HMRC) do a director's loan accounts toolkit for advisers. This is our enhanced version with planning points. 

Discovery Assessments
When can HMRC issue an assessment outside of the normal statutory time limits? What conditions must be met? What are your rights of appeal and defences?

Closure notices
When does HMRC issue a Closure Notice? Can a taxpayer demand one? Are there appeal rights?

Sch 36 Information Notices
What is a Schedule 36 Information Notice? When can HMRC issue one? What rights does the taxpayer have when an information notice is issued?

Penalties: Deliberate Behaviour
What penalties apply to deliberate behaviour? What is Deliberate Behaviour?

Adviser's Tax Penalty Planner
A guide to the key direct and indirect tax penalty regimes for returns and payments, excluding VAT.

External link

JT Quinns Limited & Queen-Rose Green v HMRC [2021] TC08338 

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