FTT erred: not all information considered

In Golamreza Qolaminejite (aka Anthony Cooper) v HMRC [2021] UKUT 0118, the Upper Tribunal (UT) found the FTT had not considered all the relevant evidence in determining that unexplained receipts were subject to tax as business income. It also concluded that the FTT had considered a contract appropriately and that an input VAT claim was blocked as there was no evidence of a supply being made.

• Mr Cooper arrived in the UK from Iran in 1996 where he had inherited valuable assets.
• He set himself up as a sole trader and a limited company.
• HMRC viewed deposits into Mr Cooper's bank account as unexplained and raised Discovery assessments over a number of years on the basis that they were business receipts.
• HMRC contended that a contract was entered into by Mr Cooper rather than his limited company and that a refunded deposit should be taxed as income.
• HMRC denied input VAT on a purchase as Mr Cooper was unable to prove that the transaction took place.
• Mr Cooper Appealed to the First Tier Tribunal (FTT).
• The FTT concluded that for the earlier years' discovery assessments, HMRC had failed to show that the receipts were trading income and that they had been deliberately omitted. The earlier discovery assessments were therefore Out of time.
• For the assessments which were in time, the burden of proof was on the appellant to show the income was not trading income, the FTT concluded that he had not done so.
• The FTT found that the contract was entered into by Mr Cooper rather than his company and that the refunded deposit should be taxed as income.
• The FTT dismissed the input VAT appeal as it was not satisfied that the transaction took place.
• Mr Cooper appealed to the UT.

UT found:

• The burden of proof was on the appellant to show that the sums received were not income.
• The FTT had failed to consider the wider nature of Mr Cooper’s case which was that his business had completely failed. There was no evidence of any trading activities.
• The UT remitted the matter back to the FTT to reconsider as this failure could have materially affected the conclusion reached.
• The FTT had not erred in law in concluding a deposit paid under the contract was taxable despite being refunded or that the contract was entered into in a personal capacity.
• It was up to the appellant to satisfy the UT, on the balance of probabilities, that they were in receipt of a taxable supply.
• The appellant had not satisfied the UT that the transaction had taken place so no VAT reclaim was allowed.

Comment

Overall, one heck of a mess. This is one of those cases where, with the benefit of hindsight, the taxpayer should have put a lot more into the initial appeal to the FTT. In the first appeal the taxpayer provided additional evidence a week before and further late evidence was not admitted as it was only provided on the day.

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? What are your rights of appeal and defences?

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

Time limits  for tax assessments, claims and refunds
What are the time limits for claiming a tax refund? How far can HMRC go back and raise an assessment? How many years back can a taxpayer appeal? What are the time limits for correcting a tax return?

External links

Golamreza Qolaminejite (aka Anthony Cooper) v HMRC [2021] UKUT 0118