In Anthony Calcutt v HMRC [2022] TC08582, the First Tier Tribunal (FTT) a self-employed taxpayer and landlord failed to provide sufficient information to displace tax assessments and suffered 60% tax penalties as a result.

  • HMRC visited the taxpayer at his home to conduct a review of his records in which he confirmed his 2014/15 tax return was correct.
  • Following that review, HMRC wrote to the taxpayer querying amounts received in his bank account. The taxpayer confirmed that these amounts represented income from a short-term Property rental.
  • Further correspondence then confirmed that the property had in fact been let out for over three years.
  • Information provided by the taxpayer was contradictory and misleading in respect of his rental income and his sole trade profits.
  • HMRC concluded that the taxpayer should have been VAT registered for at least four years.
  • Following a review of bank statements, Discovery Assessments were raised to reflect discrepancies identified.
  • These assessments were scaled backwards to previous years, based on a Presumption of Continuity.
  • Penalties were raised for Deliberate Behaviour but were reduced to 60% for telling, helping and giving.
  • The taxpayer Appealed the tax assessments and penalties.

The FTT found that:

  • The discovery assessments were valid as:
    • The taxpayer's records were inaccurate, undeclared cash had been received and there had been false invoices.
    • HMRC analysis supported that reporting errors were made in prior years and adopting the presumption of continuity was appropriate.
    • The taxpayer did not produce any credible evidence to displace the presumption of continuity.
  • The penalties for deliberate behaviour were appropriate as the taxpayer:
    • Knew he had rental income and deliberately hid it.
    • Provided HMRC with invoices he knew to be inaccurate.
    • That HMRC reduced the penalties by 60% for telling, helping and giving was generous given the circumstances.

The appeal was dismissed.

Useful guides on this topic

Property Rental
How do you tax property income? How to tax rents? What deductions can you claim for a property business? How do you claim tax relief for losses on property business?

VAT: a beginner's guide
VAT: Where do I start? What is VAT? Who has to register for VAT? What rate should you charge? How do you calculate VAT? When are your VAT filing obligations?

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?

Discovery Assessments: At a glance
What is a Discovery Assessment? When can HMRC make a Discovery? What are the time limits for Discovery Assessment?

Penalties: Errors in Returns and Documents (subscriber version)
What penalties apply if you make an error or mistake? Is there a penalty if you fail to tell HMRC about an under-assessment? How are penalties calculated? How do you check penalties? What can you do if you receive a penalty?

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

Investigations: the presumption of continuity
What is the Presumption of Continuity? When does it apply?

External links

Anthony Calcutt v HMRC [2022] TC08582

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