Moses Mukuna v The Commissioners for HMRC [2025] UKFTT 1020 (TC)

[2025] UKFTT 01020 (TC)Case No TC09619
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 6 August 2025Date Judgment date: 21 August 2025
In public by remote video hearing
Appeal reference: TC/2024/03576
INCOME TAX – HMRC allege overclaim of expenses – rodent infestation resulting in absence of evidence to justify expenditure - discovery assessments – validity – extended time periods – closure notices – valid - penalty for deliberate overclaim – appeal dismissed
Before
TRIBUNAL JUDGE NIGEL POPPLEWELLMR JIM ROBERTSON
Between
MOSES MUKUNAAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentIn person for AppellantMs Anika Aziz litigator of HM Revenue and Customs’ Solicitor’s Office for RespondentsDECISION

INTRODUCTION

[1]This is an income tax case. In his tax returns for the tax years 2016/2017-2021/2022 (“the taxyears in question”), the appellant has claimed that certain items of expenditure which he incurred during those years were deductible from his income. In each of these years, the appellant was employed as a bus driver by the company Arriva (“Arriva”).The appellant’s case is that these expenses were, essentially, incurred on the provision of; protective equipment during the Covid pandemic; accommodation for himself and his family during the pandemic; equipment necessary to enable him to carry out his functions as a bus driver following a road traffic accident in November 2016.[2]The original receipts for these expenses were unavailable as, according to the appellant, they had been stored in his loft and had been eaten by rodents.[3]HMRC do not consider that the appellant has been able to justify to them that these expenses were incurred at all, and even if they were, they were not incurred wholly exclusively and necessarily in the performance of his duties as a bus driver.[4]Accordingly, they have issued discovery assessments for the tax years 2016/2017-2018/2019 for £6,403 (“the discovery assessments”) and, following enquiries into the appellant’s tax returns for 2019/2020-2021/2022, issued closure notices for those years assessing a further £11,964 to income tax (“the closure notices”). They have also issued a penalty assessment for £10,928.83 (“the penalty assessment”) for submitting deliberately inaccurate tax returns.[5]For the reasons given below we have dismissed the appellant’s appeals against the additional income tax and the penalty.

THE LAW

[6]There was no dispute about the relevant law which we have set out in Appendix 1.

THE EVIDENCE AND THE FACTS

[7]We were provided with a substantial bundle of documents which included authorities. The appellant gave oral evidence on which he was cross examined. Oral evidence on behalf of HMRC was given by Officer John Caulfield (“JC”). From this evidence we find as follows: Background (1). During the tax years in question, the appellant was employed by Arriva as a bus driver. (2). On 8 November 2016, the appellant was involved in a road traffic accident. He was off work for three weeks. (3). The history of the appellant’s tax returns and amendments thereto for some of the tax years in question is set out in Appendix 2. The appellant did not challenge this history which we find as a fact. (4). In a letter dated 10 February 2022 to Officer Bennett, the appellant attached copies of bank statements, explained that he had borrowed £18,000 to spend on PPE, explained further that as a bus driver he was a key worker and was at the forefront of exposure to the Covid virus, explained that his loft storage had been infested by rodents which caused profound damage, and ended by saying that “I sincerely offer my submissions. Taking into account, the emergency that was in place at the beginning of year 2020”. (5). An email from Arriva to HMRC dated 18 August 2022, in response to HMRC’s letter to them of 5 August 2022, stated that the appellant had not received any expenses from Arriva. A further email dated 24 August 2022 confirmed that if the appellant did have any expenses, he would be fully reimbursed. (6). In a letter dated 16 September 2022, HMRC told the appellant that Arriva had confirmed to them that he was not required to incur any expenses for his duties and that he could amend his tax returns accordingly. It also stated that “Any decision to amend your self-assessment return to the original figures will be reviewed by HMRC, as it may constitute a deliberate act and may result in a penalty”. (7). On 7 November 2022, HMRC (Officer Bennett) opened enquiries into the appellant’s tax returns for the years 2019/2020-2021/2022. It was JC’s evidence that this was because Officer Bennett had been unable to verify the expenditure claimed by the appellant and that his employer had confirmed that there was no requirement to claim any expenditure as a bus driver. (8). In a letter to HMRC dated 20 December 2022, the appellant explained that he had amended his tax returns and:
“Beginning of the year 2020, effects of the pandemic profoundly affected, my line of work. Being in the public sector, I was classified as an essential worker. Personal protection equipment, sorting out accommodation to protect my family, specialised cleaning detergents, and frequent discarding of clothing, not to mention psychological therapy. All added enormous cost to job expenses”. (9). In his letter to HMRC of 1 March 2023, the appellant noted that the Covid 19 pandemic could cause profound disruption, some documents were not in a retrievable state due to rodent damage and decomposition, and “a health risk was a concern hence a discarding process followed and a thorough cleaning performed”
. He went on to claim that the expenses were wholly exclusively and necessarily incurred in the performance of his duties and his belief that the steps that he had taken to protect himself in the workplace saved his life given the emergency. (10). It was JC’s evidence that Officer Bennett had seen that the appellant also claimed high expenditure for tax years 2016/2017-2018/2019 for which the appellant had not been able to provide evidence of any expenditure. It was his further evidence that Officer Bennett made his discovery on 9 March 2023 on the basis of the misgivings which he had about the veracity of the expenditure in light of Arriva’s email of 24 August 2022. (11). Officer Bennett issued the discovery assessments on 10 March 2023. In his covering letter he explained that they were issued in order to protect the interests of HMRC notwithstanding that he was not yet satisfied that the tax years under enquiry were complete and correct. The reasons given for the discovery assessments was that the appellant had claimed expenses for business travel and subsistence expenses and capital allowances, and fixed deductions for the years covered by those assessments, which Officer Bennett considered had either not been incurred or were not allowable. (12). The discovery assessments essentially rejected all expenditure save for £60 per year for the washing of uniform. (13). In response to the assessments, in a letter dated 20 March 2023, the appellant stated that the expenses claimed for the years 2016/2017-2018/2019 were incurred because of the road accident in which he was involved in November 2016, and due to the injuries inflicted as a result of an accident, “it was essential to purchase body harnessing products, customising back support seat cover, compression socks, to enable comfort, in order to carry on with work duties”. He once again confirmed that rodent infestation in his loft had unfortunately damaged necessary documents and was the reason why he had signed a mandate enabling Arriva to provide HMRC with his payslips. (14). In a letter dated 5 June 2023 from Arriva to HMRC, Arriva confirmed that as a bus driver, there was no requirement for the appellant to claim expenses. Masks had been supplied to drivers during the pandemic which were available at depots along with hand sanitiser. The appellant performed no role other than as a bus driver and there was therefore no need for him to incur any other expenses. The letter confirmed that no expenses had been claimed or paid to him in the preceding six years. (15). Following further correspondence in which the parties’ positions were rehearsed on a number of occasions, HMRC sent a penalty explanation letter dated 6 February 2024 to the appellant. This explained that HMRC were proposing to impose a penalty of £10,928.83 for submitting inaccurate returns for the tax years in question. The inaccuracies were described as: The claiming of PAYE expenditure despite having a job that did not incur expenses as confirmed by his employer; the appellant had confirmed that the expenses were a loan taken out to cover costs during the pandemic, but as he was clearly claiming expenses both before and after the pandemic and had no evidence to support his claims notwithstanding repeated requests for a breakdown of expenses, HMRC intended to impose a penalty based on deliberate behaviour. (16). In their view the behaviour was deliberate because having been told that HMRC believed the expenses were invalid, the appellant had never provided any explanation or breakdown of the figures nor supplied any supporting evidence. His job did not require him to incur expenses and he had deliberately obtained a tax advantage by claiming expenditure which he did not incur and to which he was not entitled. This was not careless, it was deliberate. Credit was given for the quality of disclosure in a total amount of 30% resulting in a penalty percentage of 59.5%. (17). In a letter dated 28 February 2024, the appellant provided a breakdown of his expenditure. (18). For the tax year 2017/2018, he had incurred £6,000 on lumbar support and £3,300 on back pain lumbar traction device. (19). For the tax year 2018/2019, he had incurred £4,500 on Joint Relief and £4,000 on N95 masks. (20). For the tax year 2019/2020, he had incurred £4,500 on N95 masks, £4,000 on protective clothing and £4,000 on Anti-Viral gels. (21). For the tax year 2020/21, he had incurred £5,000 on N95 masks, £5,500 on protection clothing, and £4,000 on Anti-Viral products. (22). For the tax year 2021/2022, he had incurred £5,600 on N95 masks, £5,700 on protection clothing, and £5,100 on Anti-Viral products. (23). On 5 March 2024, HMRC issued closure notices to the appellant for the tax years 2019/2020-2021/2022, for a total amount of £11,964. (24). On 27 May 2024, the appellant submitted his appeal to the tribunal and subsequently confirmed that his appeal was against the discovery assessments, the closure notices, and the penalty. The Loans (25). We were provided with copies of two loan agreements which the appellant claimed provided a source of funds to enable him to purchase the items for which he had claimed expenses. The first of these is for a loan of £8,000. It is not dated but the first repayment date was 16 May 2021, and the appellant confirmed in his oral evidence that it was entered into on or around that time. (26). The second loan agreement is dated 13 December 2021 and is in the sum of £10,000. JC’s evidence (27). JC was not the assessing officer which was Officer Bennett. However, as Officer Bennett was not available to give evidence, JC had reviewed Officer Bennett’s files in order to enable him to provide evidence to the tribunal. (28). In addition to the evidence recorded above, JC explained that he would have come to the same conclusion as the assessing officer; Officer Bennett had determined that the appellant had acted deliberately as he had provided no evidence to support his expense claims nor had he provided a reasonable explanation of them in light of the fact that his employer had confirmed that expenditure would not have been appropriate; in his view the discovery assessments and penalty had been correctly issued. (29). He also confirmed to the Judge in response to a question to this effect, that careless and deliberate behaviour had not been considered at the time of the discovery assessment but was only considered later during the enquiry at or around the time at which the penalty was being considered and the penalty explanation letter sent to the appellant. The appellant’s evidence (30). The appellant gave the following oral evidence. (31). The loans had been paid into his bank account. This money was used to pay for the equipment which he purchased and for which he claimed deductible expenses. He did not have complete bank account records because some of these had been eaten by rodents. He had however been able to download other bank statements. These did not cover the entirety of the tax years in question. (32). He paid for the equipment in cash and electronic transfers. The receipts for the purchases are not available as they had been eaten by rodents. Without these he was unable to demonstrate the expenditure incurred. He was unable to obtain replacement receipts from the suppliers because he had paid in cash. (33). The equipment provided by Arriva was inadequate, and to safeguard himself and his family he had to purchase better kit. He and other drivers had complained about this, but it made no difference to the quality of equipment with which they had been supplied. (34). He had asked Arriva to supply him with clothes and equipment to enable him to carry out his bus driving following his accident in November 2016, but they had said they were not prepared to provide any as he was on sick leave. (35). Even though the accident had taken place in 2016, he had to replace the equipment needed to enable him to perform his job on an ongoing basis. (36). He was aware of the Covid pandemic well before December 2019/January 2020 and had incurred expenditure on protective equipment before then. (37). His behaviour had not been deliberate. It was because as a result of the accident and the Covid pandemic, both of which were beyond his control. (38). He had received a letter dated 16 September 2022 from Officer Peel in which that officer had corrected his return for the tax year 2021/2022 and showed underpaid tax of £2,550.20. He considered that this was the extent of his liability. (39). He does not have the money to pay the tax or the penalty. He is paying off some of the outstanding money as and when he can afford it. DISCUSSION

Submissions

[8]In summary Ms Aziz submitted as follows: (1). Officer Bennett satisfies the subjective and objective tests for having made a valid discovery assessment. As the appellant had submitted a return, HMRC rely on provisions of both section 29 (4) TMA (careless or deliberate behaviour) and section 29 (5) TMA (hypothetical officer). (2). As regards the former, it is clear from the letter of 16 September 2022 that Officer Bennett had considered deliberate behaviour. As regards the latter, the hypothetical officer could not have been aware of the insufficiency from the information made available at the time that the enquiry window for the years subject to the discovery assessments, closed. (3). The appellant has mounted no challenge to the amounts in the discovery assessments, nor to the validity of the enquiry and the subsequent closure notices, nor to the amendments made by those. (4). He has not provided any evidence to displace the additional tax set out in the discovery assessments, nor the additional tax arising from the closure notices. There is no evidence of the expenditure that he has claimed. (5). Nor has he provided any evidence of the rodent infestation which he claimed had resulted in the destruction of the relevant paperwork. (6). Furthermore, the expenses claimed were not incurred wholly and exclusively and necessarily in the performance of his duties. Protective equipment had been provided by his employer. There was no need for him therefore to make any claim for additional equipment. There is no evidence that he did so. (7). The amounts claimed by the appellant and his tax returns are different from those which he has subsequently provided during the course of the enquiry and thereafter. (8). The appellant has submitted deliberately inaccurate returns. Alternatively, they were submitted carelessly. Evidence of deliberate behaviour is set out in the penalty explanation letter and is also evidenced by the amendments made by the appellant to his tax returns for 2019/2020-2021/2022. The amounts made by those amendments to his expenses do not tally with the expenses originally claimed, nor with each other, nor with the amount subsequently provided by the appellant during the course of HMRC’s enquiries.[9]In summary the appellant submitted as follows: (1). He repeated the assertions regarding the expenditure set out at [7(31)-(39)] above. (2). He has not behaved deliberately even if he might have been careless. A taxpayer should not be penalised for events beyond his control. This included Covid and damage to the documents caused by the rodent infestation. An unintentional mistake does not automatically amount to deliberate behaviour. (3). He earns only £30,000 a year and having to discharge the tax liability and penalty would mean he could not meet his living expenses. (4). Covid was an emergency, and we should consider his appeal in the context of his frontline work and the fact that some of his colleagues lost their lives. (5). He has tried to provide evidence by way of bank statements and the loan documentation to justify the expenditure, but this evidence has been rejected by HMRC.

Our view

[10]The parties accept that it is up to HMRC to establish that the discovery assessments were validly made and served on the appellant and reflect a subjectively and objectively valid discovery made by an HMRC officer. It is also up to HMRC to establish they opened a valid enquiry and subsequently closed it by issuing valid closure notices which were properly served on the appellant. The standard of proof is the balance of probabilities.[11]If HMRC can establish the validity of the foregoing, then the burden of proving that they overcharge the appellant, rests with the appellant. He must establish that it is more likely than not that they overcharge him.[12]The same principle applies to the penalty. It is up to HMRC to prove deliberate or careless behaviour on the part of the appellant. Again, the standard is the balance of probabilities.

The discovery assessments

[13]The Upper Tribunal decision in Jerome Anderson v HMRC [2018] UKUT 0159 (“Anderson”) makes it clear that the discovery process which must be undertaken by the relevant officer has two limbs. The subjective limb (namely the officer must believe that the information available to him points in the direction of there being an insufficiency of tax) and an objective limb (the officer’s belief is one which a reasonable officer could form).[14]The thresholds for the subjective and objective limbs for making a discovery are low. All HMRC have to show is that Officer Bennett believed that the information available to him pointed in the direction of there being an insufficiency of tax. And that his belief that there was that insufficiency is objectively reasonable. The officer must act honestly and reasonably. The reason for the officer concluding that there is an insufficiency can be for any reason, including a change of view, change of opinion, or correction of an oversight.[15]The usual way in which HMRC establish that these limbs are satisfied is to call the assessing officer as a witness. That has not been possible in this case. The oral evidence relating to the validity of the making of the discovery has been given by JC. He explained the actions of Officer Bennett and concluded that he, JC, would have come to the same conclusions. But that does not, of itself, show that Officer Bennett satisfies both limbs of the test.[16]However, there is evidence of what he did in the discovery assessment letter dated 10 March 2023. In that letter he explains that he is proposing to issue discovery assessments to protect HMRC’s position and gives reasons for his assessments. This clearly demonstrates that he considered the information that he had been provided with up to that point. That included the original tax returns for the tax years in question, the amendments made by the appellant to his 2019/2020-2021/2022 tax returns (set out in Appendix 2) and the information provided by the appellant in his correspondence before that date, including the assertion that the appellant did not have original documents to justify the claims due to the rodent infestation.[17]The letter 10 March 2023 records the fact that the appellant had claimed PAYE expenses, which the officer had rejected either because they were not eligible for tax relief or they had not been incurred.[18]So the officer had clearly considered information that he had before him and had come to the belief that it pointed in the direction of there being an insufficiency (the subjective limb). Furthermore, it is our view that the officer’s belief was an objectively reasonable one based on the evidence which we have recited above (the objective limb). So, Officer Bennett made a valid discovery.[19]In order to establish that a valid assessment based on that discovery has been made, HMRC must fulfil one of the conditions set out in section 29 (4) or section 29 (5) TMA. These are set out below: (4) The first condition is that the situation mentioned in subsection (1) above was brought about carelessly or deliberately by the taxpayer or a person acting on his behalf. (5) The second condition is that at the time when an officer of the Board—(a) ceased to be entitled to give notice of his intention to enquire into the taxpayer's return under section 8 or 8A of this Act in respect of the relevant year of assessment; or(b) informed the taxpayer that he had completed his enquiries into that return, the officer could not have been reasonably expected, on the basis of the information made available to him before that time, to be aware of the situation mentioned in subsection (1) above.[20]As regards section 29 (4) and following Mullens v HMRC [2023] UKUT 00244 (“Mullens”) it is our view that whilst it is the tribunal’s function to determine whether the appellant has been “guilty” of careless or deliberate behaviour, HMRC must establish not only that at the time they had evidence of either behaviour, but also that they had considered it (or rather the assessing officer had considered it) at the time of issuing the assessment.[21]All that HMRC need to show is that there was prima facie evidence of either behaviour which was considered by Officer Bennett when concluding that there was insufficiency in the appellant’s tax return. This is consistent with the officer’s obligations to have considered the information available to him and to act honestly and reasonably. This is a low bar. It is not for HMRC to determine carelessness, that is a matter for this tribunal. But the officer must have prima facie evidence which he has considered.[22]Unfortunately for HMRC, we are not satisfied that they have shown that Officer Bennett considered either careless or deliberate behaviour, by the appellant, at the time that he made his discovery and issued the discovery assessments. JC’s evidence was that that discovery was made on 9 March 2023. In his witness statement he says that it was Arriva’s confirmation in the summer of 2023 (he says 5 June 2023 but the evidence that we have seen suggests it was August 2023) which confirmed that the appellant’s role as a bus driver did not have any requirement to claim any expenditure which “led Officer Bennett to determining [the appellant’s] behaviour in claiming these expenses as deliberate which is why the penalties totalling £10,928.23 were issued on 19 April 2024”.[23]But in his oral evidence he said that the appellant’s behaviour was not considered until after the discovery assessments had been issued, and it was only considered in connection with the penalty.[24]This evidence, therefore, does not lead us to conclude that Officer Bennett, on the balance of probabilities, considered the evidence of careless or deliberate behaviour at the time of making the assessment. He might well have done so, but the failure by HMRC to call him means that the secondary evidence is insufficient to discharge HMRC’s burden of proof.[25]Ms Aziz suggests that there is evidence that the officer did consider deliberate behaviour in HMRC’s letter of 16 September 2022 in which they say “Any decision to amend your self-assessment return to the original figures will be reviewed by HMRC, as it may constitute a deliberate act and may result in a penalty”.[26]We reject this is evidence that at that time Officer Bennett had considered the appellant’s behaviour to be either careless or deliberate. It simply, in the context of amending a self-assessment return, observes that the appellant should be careful before amending a return as a decision to do so might constitute a deliberate act.[27]Accordingly, we reject the validity of the discovery assessments on the basis that they satisfy the conditions set out in section 29 (4) TMA.[28]However, it is argued that the discovery assessments do comply with section 29 (5) TMA and are thus valid. We accept Ms Aziz’s submission that the hypothetical officer could not have been expected to have been aware of the insufficiencies in the appellant’s tax returns for 2016/2017-2018/2019 at the time that the enquiry windows closed for those returns. The information on which the hypothetical officers’ knowledges tested is, in this case, the information set out in the appellant’s tax returns. It would not have been possible from those returns for the hypothetical officer to be aware of the details of the excessive claims (as to which see below) made by the appellant in those returns.[29]We are therefore of the view that the discovery assessments were valid assessments.[30]The standard time limit within which such assessments can be issued is four years from the end of the year of assessment in question, but this can be extended to 6 years where HMRC can establish careless behaviour and 20 years where HMRC can establish deliberate behaviour.[31]Following Mullens, HMRC must be able to demonstrate careless or deliberate behaviour on the part of the appellant. However, in contrast to the need to show that prima facie evidence of this was considered by the officer at the time of issuing the assessment (as is required for the purposes of s29 (4) TMA) all HMRC have to do is show that the appellant has been guilty of culpable behaviour (see Mullens at [69(2)(d)]).[32]For the reasons set out in [58-64] below we have concluded that the insufficiency in the appellant’s returns was caused by his deliberate behaviour.[33]So HMRC can rely on the extended 6 or 20 year time periods, which means that the discovery assessments which were issued on 10 March 2023 are valid in time assessments.

The overcharge

[34]Notwithstanding that the appellant’s position is relevant to the closure notices, we now think it is appropriate to deal with his case that he has been overcharged. Having established the validity of the discovery assessments it is now up to the appellant to establish, on the balance of probabilities, that they overcharge him.[35]Unfortunately for the appellant, he has not managed to do this to our satisfaction.[36]We say this for a number of reasons.[37]Firstly, he has provided no documentary evidence of the expenditure. It may very well be, as he has submitted, that the relevant receipts which he needs to justify the expenditure are unavailable because they were eaten by rodents. But the reason he is not able to provide the relevant evidence is largely irrelevant when it comes to the amount of tax due.[38]We were taken through some of his bank statements in an attempt by the appellant to suggest that some of the outgoings were for the items for which he has claimed allowable expenses. We are afraid that there was no correlation between the outgoings on the one hand and the items on which those outgoings were alleged to have been incurred, on the other. There was certainly no identification of those outgoings with the items of expenditure set out in his letter of 28 February 2024.[39]The appellant claims that the loans are evidence of qualifying expenditure. We disagree. The loans are simply money which was paid to the appellant. They cast no light on the nature of the expenditure which the appellant asserts. They could have been used for something completely different. There is no documentary correlation between the loans on the one hand and the use to which those loans were put, on the other.[40]Secondly, we are of the view that we cannot rely on the appellant’s oral or written evidence.[41]It seems to us that the appellant is just as uncertain of the purported expenditure as we are. In his letter of 28February 2024, he identifies what are effectively round sum amounts for a number of items of expenditure. For example, in 2020/2021; £5,000 for N 95 masks, £5,500 for protective clothing, and £4,000 for anti-viral products. By the time he wrote this letter his documents had been purportedly eaten by rodents. We do not understand, therefore, where he obtained these figures from. In any event, we think it is inherently unlikely that any amounts that he spent not only in this year (as evidenced by the foregoing figures) but in other years, were similar round sum amounts.[42]If he did indeed spend money on those items, then it is highly likely that the amounts would be more precise and specific than those set out in the letter.[43]Finally, the amounts claimed in his original returns, then as subsequently amended, and then as set out in the letter of 28 February 2024, are inconsistent with each other. This is clear from a comparison of the figures set out in that letter with those set out in Appendix 2.[44]Take 2021/2022 as an example. In the letter of 28 February 2024, the appellant claims that he spent £16,400 on allowable expenditure. In his tax return for that year, he claimed expenses of £13,410. When he amended that return on 24 July 2022, he claimed expenses of £15,910. When he subsequently amended it on 16 September 2022, he claimed expenses of £18,060.[45]The fluidity of these numbers suggests to us that the appellant was grasping at straws. He had no records of the amount spent, and if he did indeed spend money on the items alleged, he is not in a position to provide any evidence as to the amount so spent.[46]And so he has not been able to satisfy the burden of establishing that, on balance, he did spend these amounts on the items so claimed.[47]Furthermore, in light of the claims for PPE, for years which clearly pre-date the onset of the Covid pandemic in the UK, we have serious reservations as to the veracity of his testimony regarding expenditure on those items. In 2018/2019 (i.e. before April 5, 2019) the appellant has claimed that he spent £4,000 on N95 masks. This is inconceivable. At that stage the UK was wholly ignorant of the existence, let alone of the threat, of the Covid virus. The appellant’s suggestion that he had known of it and had taken steps to protect himself against it, is risible.[48]We wholly reject this explanation as evidence that he incurred expenditure in the amounts claimed on that equipment. This causes us to treat, with considerable suspicion, the evidence (including his oral evidence, the amounts set out in his correspondence and the amounts reflected in the amendments he made to his returns) he has given regarding the nature and amounts of the alleged expenditure.[49]Accordingly, we have concluded that the appellant did not spend the amounts so claimed on expenditure which qualified for a tax deduction under section 336 ITEPA for any of the tax years in question.

The closure notices

[50]It is for HMRC to establish that they opened a valid enquiry into the relevant tax years and then issued and served valid closure notice on the appellant. From the evidence that we have seen, they have established both. The appellant has not seriously challenged either the technical validity of the closure notices nor the amounts set out in them. We therefore find that the closure notices were valid and the amendments made by them were numerically correct.[51]The onus then is on the appellant to show that the amendments overcharge him. For the same reasons that we have given as regards his failure to establish an overcharge in relation to the discovery assessments, we are not satisfied that he has demonstrated that the closure notices and the amendments made by them overcharge him either.

The penalty

[52]Under Schedule 24 to the Finance Act 2007, a taxpayer who submits an inaccurate return is liable to a penalty. The amount of the penalty is a proportion of the potential lost revenue arising from that inaccuracy.[53]Where the inaccuracy is due to the deliberate but not concealed behaviour of the taxpayer, the maximum proportion is 70% of the potential lost revenue.[54]A penalty can be reduced if the taxpayer assists HMRC whilst they are considering his tax position. This is called disclosure.[55]If HMRC think it is right because there are special circumstances, HMRC can reduce a penalty. If they fail to do so, then on appeal an appellant can challenge HMRC’s decision not to so reduce a penalty, but only if that decision was flawed in the judicial review sense.[56]The Supreme Court considered the meaning of “deliberate” in relation to whether there was a deliberate inaccuracy in a document in HMRC v Tooth [2021] 1 WLR 2811(“Tooth”) in which it said:
“42. The question is whether it means (i) a deliberate statement which is (in fact) inaccurate or (ii) a statement which, when made, was deliberately inaccurate. If (ii) is correct, it would need to be shown that the maker of the statement knew it to be inaccurate or (perhaps) that he was reckless rather than merely careless or mistaken as to its accuracy. 43. We have no hesitation in concluding that the second of those interpretations is to be preferred, for the following reasons. First, it is the natural meaning of the phrase “deliberate inaccuracy”
. Deliberate is an adjective which attaches a requirement of intentionality to the whole of that which it describes, namely “inaccuracy”. An inaccuracy in a document is a statement which is inaccurate. Thus the required intentionality is attached both to the making of the statement and to its being inaccurate”.[57]Although this was said in relation to a different statutory provision (s 29 TMA) the Supreme Court recognised, at [33] and [45], the alignment of the language used with that of the schedule 24 penalty provisions. Accordingly, for there to be a “deliberate” inaccuracy HMRC have to establish an intention “to mislead the Revenue on the part of the taxpayer as to the truth of the relevant statement or, perhaps, (although it need not be decided on this appeal) recklessness as to whether it would do so”. (see Tooth at [47])[58]HMRC’s case that the appellant’s behaviour was deliberate was set out in the penalty explanation letter. In their view the appellant’s job did not require him to incur expenses (something which was confirmed by Arriva); he had claimed expenses on costs incurred during the Covid pandemic, yet he had claimed them both before and after the pandemic; and notwithstanding repeated requests for evidence and a breakdown of the expenses, the appellant had not supplied these.[59]HMRC have also submitted that evidence of deliberate behaviour comes from the amendments made to the appellant’s tax returns as set out in Appendix 2. These amendments were conscious decisions made by the appellant, and the variety of numbers used by the appellant in those amendments demonstrate that he did not know what his expenses were. And that he was seeking to mislead HMRC as to the accuracy of those numbers.[60]The appellant’s position was that the amounts claimed were an accurate reflection of the expenditure incurred on the alleged items, as were the amendments to his returns.[61]For the reasons already given, we have rejected the appellant’s position. He has provided insufficient evidence that he incurred the expenditure as alleged or at all.[62]The appellant was not able to say when the rodents purportedly destroyed his primary records. But he did not say that the amendments he made to his tax returns as set out in Appendix 2, were made on the basis of those records. We find as a fact that when he amended his returns, he did not have the records of the alleged expenditure before him.[63]In our view, even if the appellant had incurred expenditure as he alleges (which we seriously doubt) the amounts originally claimed and as subsequently amended in the amendments to his returns were not based on the precise amount of such alleged expenditure. And the appellant knew this. The round sum amounts set out not only in the original returns but also in his amended returns, did not reflect the precise amounts of any expenditure.[64]We have no hesitation, therefore, in agreeing with HMRC that the appellant’s behaviour in respect of the original returns and as amended, was deliberate. He knew that the expenditure had not been incurred either at all or in the amounts claimed, yet he presented the amounts as a truthful reflection of allowable expenditure. He did this seeking to mislead HMRC.[65]We therefore uphold the penalty.[66]HMRC consider that there are no grounds for making a special reduction. We agree. The appellant’s circumstances are not sufficiently special to warrant a reduction. Neither the rodent infestation nor the Covid pandemic nor his financial situation are sufficiently special that the penalty should be reduced, bearing in mind that he has made what in our view have been excessive claims which are based on what is tantamount to fraudulent behaviour (see Tooth at [83]). Furthermore, the appellant has not been able to persuade us that HMRC’s decision not to reduce the penalty is flawed.

Conclusion

[67]Drawing the strands together.[68]We have decided that HMRC have made valid discovery assessments based on section 29(5) TMA and benefit from the extended time periods of 6 and 20 years to issue the assessments.[69]We have also decided that the closure notices and consequential amendments are technically valid and arithmetically correct.[70]The appellant has not established that the amounts of additional tax assessed by HMRC, overcharge him.[71]HMRC have established that the appellant’s behaviour was deliberate, and we have concluded that the penalty has been properly imposed.

DECISION

[72]We therefore dismiss this appeal.

RIGHT TO APPLY FOR PERMISSION TO APPEAL

[73]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date: 21st AUGUST 2025 APPENDIX 1 THE LEGISLATION TMA

THE LEGISLATION

[1]Section 29 Taxes Management Act 1970 (“TMA”) provided:(1) If an officer of the Board or the Board discover, as regards any person (the taxpayer) and a year of assessment— (a) that any income which ought to have been assessed to income tax, or chargeable gains which ought to have been assessed to capital gains tax, have not been assessed, or (b) that an assessment to tax is or has become insufficient, or (c) at any relief which has been given is or has become excessive, the officer or, as the case may be, the Board may, subject to subsections (2) and (3) below, make an assessment in the amount, or the further amount, which ought in his or their opinion to be charged in order to make good to the Crown the loss of tax.(2) …(3) Where the taxpayer has made and delivered a return under section 8 or 8A of this Act in respect of the relevant year of assessment, he shall not be assessed under subsection (1) above— (a) in respect of the year of assessment mentioned in that subsection; and (b) in the same capacity as that in which he made and delivered the return, unless one of the two conditions mentioned below is fulfilled.(4) The first condition is that the situation mentioned in subsection (1) above was brought about carelessly or deliberately by the taxpayer or a person acting on his behalf.(5) The second condition is that at the time when an officer of the Board— (a) ceased to be entitled to give notice of his intention to enquire into the taxpayer's return under section 8 or 8A of this Act in respect of the relevant year of assessment; or (b) informed the taxpayer that he had completed his enquiries into that return, the officer could not have been reasonably expected, on the basis of the information made available to him before that time, to be aware of the situation mentioned in subsection (1) above.(6) For the purposes of subsection (5) above, information is made available to an officer of the Board if— (a) it is contained in the taxpayer's return under section 8 or 8A of this Act in respect of the relevant year of assessment (the return), or in any accounts, statements or documents accompanying the return; (b) it is contained in any claim made as regards the relevant year of assessment by the taxpayer acting in the same capacity as that in which he made the return, or in any accounts, statements or documents accompanying any such claim; (c) it is contained in any documents, accounts or particulars which, for the purposes of any enquiries into the return or any such claim by an officer of the Board, are produced or furnished by the taxpayer to the officer …; or (d) it is information the existence of which, and the relevance of which as regards the situation mentioned in subsection (1) above— (e) could reasonably be expected to be inferred by an officer of the Board from information falling within paragraphs (a) to (c) above; or (i) are notified in writing by the taxpayer to an officer of the Board.(7) In subsection (6) above— (a) any reference to the taxpayer's return under section 8 or 8A of this Act in respect of the relevant year of assessment includes— (i) a reference to any return of his under that section for either of the two immediately preceding chargeable periods;… (ia) …; and (ii) where the return is under section 8 and the taxpayer carries on a trade, profession or business in partnership, a reference to any partnership return with respect to the partnership for the relevant year of assessment or either of those periods; and …[2]Section 34 TMA provided:(1) Subject to the following provisions of this Act, and to any other provisions of the Taxes Acts allowing a longer period in any particular class of case, an assessment to income tax,capital gains tax or to tax chargeable under section 394(2) of the Income Tax (Earnings and Pensions) Act 2003 may be made at any time not more than 4 years after the end ofthe year of assessment to which it relates.(2) An objection to the making of any assessment on the ground that the time limit for making it has expired shall only be made on an appeal against the assessment.[3]Section 50 TMA provided: (1)– (5) . . . (6) If, on an appeal notified to the tribunal, the tribunal decides—(a) that, . . ., the appellant is overcharged by a self-assessment;(b) that, . . ., any amounts contained in a partnership statement are excessive; or(c) that the appellant is overcharged by an assessment other than a self-assessment, the assessment or amounts shall be reduced accordingly, but otherwise the assessment or statement shall stand good. (7) If, on an appeal notified to the tribunal, the tribunal decides— (a) that the appellant is undercharged to tax by a self-assessment . . .; (b) that any amounts contained in a partnership statement . . . are insufficient; or (c) that the appellant is undercharged by an assessment other than a self-assessment, the assessment or amounts shall be increased accordingly.[4]Where HMRC have opened an enquiry into taxpayer’s self-assessment tax return, the enquiry is completed when an HMRC officer “informs the taxpayer by notice (a “final closure notice”) …that the officer has completed his enquiries”. (Section 28A (1B) Taxes Management Act 1970 (“TMA”).[5]A final closure notice must state the officer’s conclusions and “make the amendments of the return required to give effect to his conclusions”. (Section 28A (2) TMA)[6]Under section 31 TMA an appeal may be brought against–(a) any amendment of a self-assessment under section 9C of this Act (amendment by Revenue during enquiry to prevent loss of tax),(b) any conclusion stated or amendment made by a closure notice under section 28A or 28B of this Act (amendment by Revenue on completion of enquiry into return),(c) any amendment of a partnership return under section 30B(1) of this Act (amendment by Revenue where loss of tax discovered), or(d) any assessment to tax which is not a self-assessment.[7]Section 336 Income Tax (Earning and Pensions) Act 2003 (“ITEPA”) provided: (1) The general rule is that a deduction from earnings is allowed for an amount if— (a) the employee is obliged to incur and pay it as holder of the employment, and (b) the amount is incurred wholly, exclusively and necessarily in the performance of the duties of the employment. APPENDIX 2 THE SA HISTORY

APPENDIX 2

[1]On 18 June 2019, the Appellant submitted his tax return for the tax year 2018/19. The return showed an income of £30,070.00, with expenses totalling £12,260.00. The tax overpaid was £2,295.00.[2]On 29 June 2019, the Appellant submitted his tax return for the tax year 2016/17. The return showed an income of £27,130.00, with expenses totalling £9,970.00. The tax overpaid was £1,884.00.[3]On 29 June 2019, the Appellant submitted his tax return for the tax year 2017/18. The return showed an income of £27.657.00, with expenses totalling £9,965.00. The tax overpaid was £1,883.60.[4]For the tax year 2019/20, there were several amendments made: (1). On 24 May 2022, the Appellant submitted his tax return for the tax year 2019/20 (Version 1). The return showed an income of £34,637.00, with expenses totalling £12,560.00. The tax overpaid was £2,964.60. (2). On 12 October 2022, the Respondents amended the tax return for the tax year 2019/20 (Version 2). The return showed an income of £34,637.00, with expenses totalling £60.00. The tax due was £2,442.20. (3). On 03 November 2022, the Respondents amended the tax return for the tax year 2019/20 (Version 3). The return showed an income of £34,637.00, with expenses totalling £12,560.00. The tax overpaid was £2,964.60. (4). On 05 March 2024, the Respondents made a revenue amendment with the issue of the closure notice for the tax year 2019/20 (Version 4). The return showed an income of £34,637.00, with expenses totalling £60.00. The tax due was £2,442.20.[5]For the tax year 2020/21, there were several amendments made: (1). On 13 April 2021, the Appellant submitted his tax return for the tax year 2020/21 (Version 1). The return showed an income of £32,262.00, with expenses totalling £12,809.00. The tax overpaid was £107.40. (2). On 13 April 2021, the Appellant amended his tax return for the tax year 2020/21 (Version 2). The return showed an income of £32,262.00, with expenses totalling £12,809.00. The tax overpaid was £107.40. (3). On 02 April 2022, the Appellant amended his tax return for the tax year 2020/21 (Version 3). The return showed an income of £32,262.00, with expenses totalling £12,809.00. The tax overpaid was £2,715.40. (4). On 17 September 2022, the Appellant amended his tax return for the tax year 2020/21 (Version 4). The return showed an income of £32,262.00, with expenses totalling £17,000. The tax overpaid was £945.60. (5). On 12 October 2022, the Respondents amended the tax return for the tax year 2020/21 (Version 5). The return showed an income of £32,262.00, with no expenses. The tax due was £2,454.40. (6). On 03 November 2022, the Appellant amended his tax return for the tax year 2020/21 (Version 6). The return showed an income of £32,262.00, with expenses totalling £17,000. The tax overpaid was £945.60. (7). On 05 March 2024, the Respondents made a revenue amendment with the issue of the closure notice for the tax year 2020/21 (Version 7). The return showed an income of £32,262.00, with expenses totalling £60.00. The tax due was £2,442.40.[6]For the tax year 2021/22, there were several amendments made: (1). On 01 May 2022, the Appellant submitted his tax return for the tax year 2021/22 (Version 1). The return showed an income of £37,521.00, with expenses totalling £13,410.00. The tax overpaid was £3,368.80. (2). On 02 May 2022, the Appellant amended his tax return for the tax year 2021/22 (Version 2). The return showed an income of £37,521.00, with expenses totalling £13,410.00. The tax overpaid was £3,368.80. (3). On 24 July 2022, the Appellant amended his tax return for the tax year 2021/22 (Version 3). The return showed an income of £37,521.00, with expenses totalling £15,910.00. The tax overpaid was £619.80. (4). On 15 September 2022, the Respondents amended the tax return for the tax year 2021/22 (Version 4). The return showed an income of £37,521.00, with expenses totalling £60.00. The tax due was £2,550.20. (5). On 16 September 2022, the Appellant amended his tax return for the tax year 2021/22 (Version 5). The return showed an income of £37,521.00, with expenses totalling £18,060.00. The tax overpaid was £1,049.80. (6). On 12 October 2022, the Respondents amended the tax return for the tax year 2021/22 (Version 6). The return showed an income of £37,521.00, with expenses totalling £60.00. The tax due was £2,550.20. (7). On 03 November 2022, the Appellant amended his tax return for the tax year 2021/22 (Version 7). The return showed an income of £37,521.00, with expenses totalling £15,910.00. The tax overpaid was £619.80. (8). On 05 March 2024, the Respondents made a revenue amendment with the issue of the closure notice for the tax year 2021/22 (Version 8). The return showed an income of £37,521.00, with expenses totalling £60.00. The tax due was £2,550.20.