In Stephen John Mullens v HMRC [2023] UKUT244, the Upper Tribunal (UT) upheld the decision by the First Tier Tribunal  (FTT) that the receipt of £40 million in payments from the Ecclestone family by their family lawyer was taxable income rather than a gift. 

  • Mr Mullens received payments totalling almost £40 million between 1999 and 2013.
    • Payments of £2.25m were made to induce him to resign as a partner in a law firm to enable him to work for the Ecclestone family.
    • Three further payments totalling £36m were then made to Mr Mullens by Mrs Ecclestone.
  • Mr Mullens did not declare these as income on his Self Assessment returns. He instead asserted they were gifts. 
  • HMRC issued discovery assessments and assessed penalties, some of which were under the s.36 Taxes Management Act (TMA) 1970 extended time limits for making an assessment (six years for careless conduct and 20 years for fraudulent or deliberate conduct). With regard to the last payment, HMRC were within time to enquire into the tax return under the normal enquiry time limits. 
  • Mr Mullins Appealed against all the assessments of the payments to income, and the penalty assessments.
  • The First Tier Tribunal dismissed his appeal finding that the payments were income and that penalties were correctly assessed as a result of his deliberate failure to declare the payments in his Self Assessment returns.
  • Mr Mullens appealed to the Upper Tribunal (UT).

The UT upheld the decision of the FTT. It found that: 

  • Where the taxpayer has acted with ‘culpable conduct’, which is defined as careless or Deliberate behaviour, HMRC can make a discovery assessment for the loss of tax under s.29 TMA 1970. 
  • The time limit for making a discovery assessment is extended by s.36 TMA 1970 for culpable conduct. 
  • Provided that HMRC establish that they can validly raise an assessment within s.29 TMA 1970, they will generally automatically meet s.36 TMA 1970 if there has been culpable conduct. 
  • All of the payments in question in the appeal were income. Mr Mullens knew that they should have been disclosed on his tax returns for the tax years in question, but he made a conscious and deliberate decision not to disclose them. 

Useful guides on this topic 

Discovery Assessments
When can HMRC issue an assessment outside of the normal statutory time limits? What conditions must be met? Can HMRC issue two alternative assessments for the same period? What are your rights of appeal and defences?

How to appeal a tax penalty (subscriber version)
What are the steps in making an appeal? What should your appeal cover? What does recent case law say on this topic?

Penalties: Deliberate Behaviour
Enhanced tax penalties apply in cases where a taxpayer's deliberate behaviour results in a potential loss of tax revenue.

How to appeal an HMRC decision
Disagree with a HMRC decision? How to appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

External links  

Stephen John Mullens v HMRC [2023] UKUT244 

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