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Undeclared Income: Landlord Appeals Dismissed in £28k Tax Case

Published by Chirag
Published Date: March 27, 2024

In a significant legal development, an appeal by a landlord against HMRC's discovery assessments for £28,000 in unpaid tax and penalties has been dismissed on grounds of insufficient information. Undeclared income was at the heart of the issue, with Finola Owens, the appellant, contesting discovery assessments under Section 29 of the Taxes Management Act 1970 (TMA 1970) for £24,423.16 in unpaid taxes over five tax years, from 2016/17 to 2020/21. Additionally, Owens challenged five penalty notices totalling £4,008.54, imposed under Schedule 41 of the Finance Act 2008 (FA 2008) for the same period.

Undeclared Income Forms Core of Issue

The assessments were based on undeclared income, with HMRC issuing the initial assessments on 12 December 2022. Owens' tax representative, Jon Vyse of Pearl Lily & Co Accountants, contacted HMRC upon receipt of the assessments, presenting a notice of liability for the 2017 tax year. However, Vyse requested the removal of the late penalty notice, citing a reasonable excuse for the delay in self-assessing the tax liability.

Undeclared Income

Despite repeated requests for information from HMRC, including information notices regarding the source of Owens' income, responses were delayed until 16 February 2022. Owens attributed the failure to declare income to HMRC's failure to issue notices to file tax returns, claiming to have sent notifications of chargeability to tax.

Owens' Grounds for Appeal

In her appeal, Owens raised multiple grounds, including the expiry of the four-year time limit under Section 34 of TMA 1970 and HMRC's failure to issue a notice to file tax returns under Section 8 of TMA 1970. She also argued that penalties for failure to notify should be invalid as there was no compulsion under TMA 1970 to make a voluntary return.

In its defence, HMRC argued that Owens and her agent had no reasonable excuse for not acting upon their knowledge of the tax liability. The tribunal found that the appellant's actions were non-deliberate, leading to penalty charges of 30% of the total potential lost revenue.

Undeclared Income

Despite Owens' claims and appeals, the tribunal upheld the five discovery assessments and penalty charges, dismissing the appeal. This case serves as a cautionary tale for landlords and taxpayers alike, highlighting the importance of timely and accurate tax reporting to avoid potential penalties and legal consequences. Undeclared income remains a focal point in tax enforcement efforts, emphasising the need for compliance and transparency in financial matters.

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