In Philip Cox and Debra Cox v HMRC [2026] UT000114, the Upper Tribunal (UT) found that HMRC's decision-making in refusing to suspend penalties applied for an inaccurate Business Asset Disposal Relief claim was not flawed.
The First Tier Tribunal (FTT) dismissed an earlier appeal made by husband and wife, Philip and Debra Cox, who had claimed Business Asset Disposal Relief (BADR) when they had disposed of their entire shareholding in David Williams IFA Holdings Ltd (DWIFA).
The FTT deemed the claim to be made carelessly; Reasonable care had not been taken when making the claim.
- Before claiming BADR, Philip and Debra Cox had gifted shares to other shareholders to reduce their ownership to approximately 4.143% each, below the required 5% needed to claim BADR.
- HMRC issued notices of enquiry, prompting Mr and Mrs Cox to concede that the claim was invalid.
- HMRC issued Closure notices and Penalty notices, stating that Mr and Mrs Cox had been Careless and were liable to penalties amounting to 15% of the Potential Lost Revenue (PLR). HMRC refused to suspend the penalty.
- The FTT agreed with HMRC that Mr and Mrs Cox had not behaved prudently or taken reasonable care. The FTT did not believe the errors were simple oversights.
- The FTT also refused to grant a suspension of the penalty charged by HMRC on the basis that:
- HMRC can only exercise their discretion to suspend penalties if it would help the person liable for the penalty to avoid future penalties for careless inaccuracy.
- The error was a one-off and this, therefore, precluded suspension.
- Mr and Mrs Cox appealed to the Upper Tribunal (UT) in relation to the decision to suspend the penalties.
The UT found that:
- Schedule 24 Finance Act 2007, Paragraph 14 does not require that any further penalties be imposed for a similar inaccuracy.
- There is no requirement for there to be a 'link' between the issue for which the penalty has been issued and the type of inaccuracy that might give rise to a further penalty.
- This does not mean that there should be no link or connection between a careless inaccuracy and the possibility of further penalties.
- The FTT found that a one-off error would not 'normally' be suitable for suspension.
- The UT stated that it preferred the formulation that 'suspension is not automatically precluded where the careless inaccuracy which resulted in the penalty is a one-off event'.
- Although an error was made in law by the FTT in setting out the above principles, it was not material to the final decision.
- HMRC's argument was correct: that they could not see any future careless errors that could be avoided by setting a condition for suspension, because no condition could be specified in this scenario.
- The FTT could only instruct HMRC to suspend penalties if it believed HMRC's decision was flawed.
- The conclusion from the FTT was that HMRC's decision was not legally flawed; the UT agreed with this conclusion.
The appeal was dismissed.
Useful guides on this topic
Business Asset Disposal Relief (Entrepreneurs' Relief): Disposal of shares or securities in a company
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Client Briefing: How to avoid penalties for carelessness?
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How to appeal an HMRC decision
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