Resident and Negligent

The First Tier Tribunal decided earlier this year that the taxpayer, a merchant banker named Paul Daniel, was UK Resident for tax purposes, despite his move to Brussels in 1999.  They also decided that his claim was made “negligently”: allowing HMRC to issue an extended time limit assessment for 1999/2000 – on a Capital Gain of £20million.

The FTT described this as “a hard-fought residence appeal.” The Tax Tribunal said the burden of proof was on Her Majesty’s Revenue & Customs to show that Mr Daniels was negligent.  If he was, then the burden of proof was on Mr Daniels to show that he had indeed become Non-Resident in the UK.  The judges stated that “if the claim is plainly honest, and also tenable (even though borderline) there should be no risk of negligence being established”.

HMRC challenged his Tax Residence status on the basis that he was not employed full-time abroad: partly as he had performed “substantive duties” of “particular significance” in the UK.

In this case the Tribunal was particularly troubled by the fact that the appellant’s claims were not backed up with sufficient evidence.  The judges noted that “his evidence was not backed up by a single written document of any sort (fax, email, records of phone call, any sort of timesheets or any copy of any presentation made to any potential customer)”.  They went on to say that “much depends on the credibility of the appellant’s evidence”.  In reaching their judgement that he had not left the UK to work full-time abroad, and that he had been negligent in claiming to do so, the Tribunal clearly had grave doubts about the accuracy of his evidence.  For instance, they decided that his contention regarding the amount of work he did outside the UK was “untenable” and they stated that “he has certainly not helped his case by providing no documentation whatsoever”
What does this mean for me?
This case (TC03312) demonstrates the point that in any tax assessment appeal hearing before the independent Tax Tribunal it is crucial to gather all the available evidence, and to present this clearly to the Tribunal.  Also, any evidence which is going to be given by way of testimony from the appellant needs to be rigorously tested in advance, so that it can be put clearly, accurately and tenably to the judges during the hearing.  Although there were a few technical tax issues at stake, ultimately this case was lost on the basis of the facts – or lack of them.  Facts and evidence do not emerge by themselves.  They have to be presented by the appellant and his advisers to the Tribunal at the hearing.  If you have a contentious tax appeal – whether it’s regarding tax residence or otherwise – it is crucial that your team provides as much evidence as possible, fully and effectively, at the Tribunal hearing.

How can Lynam Tax Appeal Experts Help Me?
Lynam Tax Appeal Experts have prepared for many Tribunal hearings and the process has usually meant HMRC conceding before the formal meeting.  We have also presented many cases successfully at formal contentious hearings, and we are currently assisting a number of clients through the Alternative Dispute Resolution; Internal Review; and Tribunal processes. We will fight your corner tenaciously, but also with the subtlety and skill honed from nearly 70 years’ combined real experience.

*If you need help with a difficult tax dispute or a contentious tax appeal call now for a confidential and no obligation discussion:

Paul Lynam:  0845 643 9997
Andrew Nutbrown:  07718 778710