Richard Bates v The Commissioners for HMRC [2026] UKFTT 1135 (TC)

[2026] UKFTT 01135 (TC)Case No TC 09976
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 23 July 2026Date Judgment date: 05 August 2026
Taylor House, London
Appeal reference: TC/2024/05184
Keywords - INCOME TAX - loan contractor scheme- were sums “lent” to the appellant taxable on him as employment income? - yes - validity of discovery assessments - held assessments valid - appeal dismissed
Before
TRIBUNAL JUDGE DAVID HARKNESSJULIAN STAFFORD
Between
RICHARD BATESAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentMr Bates represented himself for AppellantMr Daniel Hopkins, litigator of HM Revenue and Customs’ Solicitor’s Office for RespondentsDECISION

Introduction and summary

[1]Mr Bates was appealing against a discovery assessment (the “Assessment”) in the amount of £20,716.40 made on 18 October 2013 in respect of tax year 2010-11.[2]In summary HMRC’s case was that:(1) Mr Bates used a tax avoidance scheme called Darwinpay;(2) Darwinpay was a “contractor loan scheme” which sought to convert what would otherwise be employment income into loans from an offshore trust;(3) in 2010-11, Mr Bates received £69,030 in amounts described as “loans” (the “Loans”) from the Darwinpay arrangement (for convenience we have labelled these amounts as “Loans”, but we deal below with the proper characterisation of these amounts);(4) the Loans were not separate from Mr Bates’ remuneration, being economic reward for his services, routed through the Darwinpay structure to avoid normal income tax treatment;(5) the Loans were earnings as defined in s62 of the Income Tax (Earnings and Pensions) Act 2003 (“ITEPA”) and liable to income tax as earnings;(6) Mr Bates did not make a self-assessment return in respect of the Loans element of his remuneration and that element was not otherwise taxed;(7) HMRC discovered this on 10 September 2013 and on 18 October 2013, in order to bring the Loans into the tax charge, issued the Assessment which was a valid discovery assessment for the purposes of s29 Taxes management Act 1970 (“TMA”).[3]In summary Mr Bates’ case was that the burden of proof was on HMRC to show:(1) that the Loans were earnings within the meaning of s62; and(2) that a valid discovery had been made; and that HMRC had not discharged the burden of proof in relation to either of those issues and therefore the Assessment was invalid.[4]In the alternative, Mr Bates advanced a number of collateral arguments including that the Assessment overcharged him and/or would give rise to double taxation owing to the operation of the loan charge legislation.[5]We admired the passion and eloquence with which Mr Bates put his case, and the time and effort he had obviously put into preparing his very lengthy submissions. But for the reasons set out in more detail below, we concluded that we must dismiss Mr Bates’ appeal. We found that the Loans received by Mr Bates were earnings taxable under s62, and the Assessment was a valid in time assessment. Mr Bates’ alternative arguments were either not proven or did not raise issues within our jurisdiction.

THE LEGISLATION

[6]The relevant legislation is as follows.

Taxes Management Act 1970

[7]Section 29 TMA:(1) If an officer of the Board or the Board discover, as regards any person (the taxpayer) and a year of assessment— (a) that an amount of income tax or capital gains tax ought to have been assessed but has not been assessed, or (b) that an assessment to tax is or has become insufficient, or (c) that 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 […] their opinion to be charged in order to make good to the Crown the loss of tax.(2) Where— (a) the taxpayer has made and delivered a return under section 8 or 8A2 of this Act in respect of the relevant year of assessment, and (b) the situation mentioned in subsection (1) above is attributable to an error or mistake in the return as to the basis on which [their] liability ought to have been computed, the taxpayer shall not be assessed under that subsection in respect of the year of assessment there mentioned if the return was in fact made on the basis or in accordance with the practice generally prevailing at the time when it was made.(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, [they] 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 [they] 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 [their] 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 [they] 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. [subsections (6) and onwards are not relevant][8]Section 34 TMA: Ordinary time limit of 4 years 9.(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 or capital gains tax may be made at any time not more than 4 years after the end of the 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.

ITEPA

[10]Section 1 imposes an income tax charge on “employment income”.[11]Section 6(1) provides that the charge to tax on employment income is a charge to tax on, inter alia, “general earnings”.[12]Section 7(1) states that “employment income” means(a) earnings within Chapter 1 of Part 3 (s.62);(b) any amount treated as earnings; and(c) any amount that counts as employment income.[13]Section 7(3) provides that “General earnings” means, inter alia, earnings within Chapter 1 of Part 3 (s.62).[14]Section 62:(1) This section explains what is meant by “earnings” in the employment income Parts.(2) In those Parts “earnings”, in relation to an employment, means— (a) any salary, wages or fee, (b) any gratuity or other profit or incidental benefit of any kind obtained by the employee if it is money or money's worth, or (c) anything else that constitutes an emolument of the employment.(3) For the purposes of subsection (2) “money's worth” means something that is— (a) of direct monetary value to the employee, or (b) capable of being converted into money or something of direct monetary value to the employee.(4) Subsection (1) does not affect the operation of statutory provisions that provide for amounts to be treated as earnings (and see section 721(7)).

EVIDENCE

[15]We were given a very large amount of written evidence, consisting principally of a hearing bundle of 2302 pages and an authorities bundle of 184 pages. We were also given copies of a number of additional case law authorities. We heard oral evidence from HMRC Officer Stephanie Hargreaves who provided a witness statement of 5 pages and was cross- examined by Mr Bates. The bundle contained witness statements from Officer Lesley Stopp dated 11 October 2017 and Officer Andrew Finch dated 12 July 2019, both of which statements were given in relation to HMRC’s investigation process for contractor loan schemes; neither Officer Stopp nor Officer Finch gave evidence.[16]A statement from Mr Bates was also in the bundle, but Mr Bates did not give evidence. In relation to this, since the burden of proof was on HMRC in relation to the main issues we were considering, we took no account of the fact that Mr Bates did not give evidence, although it obviously made it more difficult to consider if there might be alternative explanations for the arrangements, since no alternatives were put forward.

The facts

[17]Based on the written and oral evidence we found the following facts. The law in this case was very largely agreed and the main dispute centred around some of the facts, Because some of the facts were disputed, we have split our findings to indicate where there were disputes and why we found the facts we did.[18]The burden of proof, to the ordinary civil standard of the balance of probabilities, lay with HMRC to establish that the Loans were earnings as defined in s62 liable to income tax as earnings and that a valid in time discovery assessment had been issued. If HMRC could show that, the burden of proof shifted to Mr Bates to demonstrate that he has been overcharged to tax by the discovery assessment.[19]The Darwinpay arrangements operated as follows, as described in the AAG1 disclosure form: “Summary: Members of the scheme become employees of an Isle of Man partnership and are granted a life interest in a UK resident discretionary trust. They elect to sell this life interest. The monies arising from the sale and not subject to CGT, NIC or IT”. “Explanation: Members of the scheme• become employees of the partnership (“The Sanzar Solutions Isle of Man Partnership”) which is resident in, and carries on business in, the Isle of Man and are paid a salary that is subject to IT, EE NI and ERNI. IT and NICs are returned on a monthly basis.• Receive loans from an offshore trust. These loans are at a discounted interest rate and the scheme members pay IT on this benefit in kind via their Self-Assessment Return.• Are granted an interest in a UK resident trust (the trust property being excluded property for inheritance tax purposes).• May elect to sell their interest in the UK trust, receiving monies in respect of this sale intended to reflect the market value of the interest. These monies are not subject to CGT, IT and NICs”.• become employees of the partnership (“The Sanzar Solutions Isle of Man Partnership”) which is resident in, and carries on business in, the Isle of Man and are paid a salary that is subject to IT, EE NI and ERNI. IT and NICs are returned on a monthly basis.• Receive loans from an offshore trust. These loans are at a discounted interest rate and the scheme members pay IT on this benefit in kind via their Self-Assessment Return.• Are granted an interest in a UK resident trust (the trust property being excluded property for inheritance tax purposes).• May elect to sell their interest in the UK trust, receiving monies in respect of this sale intended to reflect the market value of the interest. These monies are not subject to CGT, IT and NICs”.[20]The scheme may have been marketed under various different titles, but we found that the substance of the Darwinpay scheme was that:(1) individuals became employees of an Isle of Man partnership,(2) the partnership supplied their services to end users, who paid a fee to the Isle of Man partnership,(3) the partnership paid the individuals a small salary,(4) the individuals also received a much larger amount (described as a loan) from a trust which was funded by the partnership.[21]Thus in essence, the efforts of the individual generated a fee from the end user, but instead of that fee being paid direct to the individual, it went to an Isle of Man partnership, and the reward for the individual was a mixture of a small salary and a payment described as a loan.[22]We found these facts independently, based on the evidence before us, but noted that these findings are consistent with findings of fact in Sheth v HMRC [2023] UKFTT 368 (TC) (‘Sheth’) where the court was considering how the Darwinpay scheme operated.

Darwinpay and Mr Bates

[23]We found the following facts in relation to Mr Bates’ involvement with Darwinpay(1) Mr Bates was an employee of The Darwinpay Partnership during tax year 2010-11;(2) He was entitled to receive (a) a small salary calculated per hour worked based on the minimum wage and (b) to payments from the Darwinpay Trust;(3) His salary for the year amounted to £8909 but in addition he received £69,029.78 from the Darwinpay Trust and benefits in kind of £3,224;(4) Underlying clients received the benefit of services provided by Mr Bates and were billed for these at a day rate that was significantly in excess of the small salary Mr Bates was receiving (example invoices showed a day rate of £450);(5) The amounts Mr Bates received from the Darwinpay Trust were funded out of the payments from the underlying clients. The chain of evidence showed that Darwinpay Partnership used these underlying payments to make payments to the Darwinpay Trust and in turn the Darwinpay Trust used those amounts to make payments to Mr Bates which were described as loans. But the “loans” were written off in the Darwinpay Trust accounts and we concluded that there was no intention that they would ever be repaid, the reality being that these amounts were unconditional payments to Mr Bates;(6) Mr Bates did not make a self-assessment return for tax year 2010-11.[24]There was little dispute about most of these facts, except that Mr Bates disputed (3) (where he claimed not to recognise the amount of the benefits in kind) and, more materially, (5) where he asserted there was no evidence to show the £69,029.78 was not a loan.[25]The evidence for the amount of the benefits in kind came from HMRC records derived from information provided by Mr Bates’ employer and Mr Bates did not provide any evidence to challenge this figure.[26]In relation to (5), Mr Bates accepted that he had received the £69,029.78. However, he asserted that the evidence did not show(a) The Darwinpay Partnership had funded the Darwinpay Trust in relation to the loans to him, or(b) the amounts he had received from the Darwinpay Trust were earnings, or(c) that the amounts which he received were not loans which he was under an obligation to repay. In relation to (a), we found a clear chain in the evidence of payments from underlying clients being used by The Darwinpay Partnership to make payments to the Darwinpay Trust. We deal with (b) at [33]. In relation to (c), on the balance of probabilities we concluded that the amounts described as “loans” were in fact unconditional payments to Mr Bates. There were numerous points indicating that was the case and no credible evidence to suggest these amounts were loans with a repayment expectation. The principal points suggesting the amounts were unconditional payments were: (1) That this was unlikely in reality. From his submissions we were satisfied that Mr Bates was an obviously intelligent and sophisticated individual. It was not credible that Mr Bates would work on the basis the end user client paid £450 per day for his services, but he only received a minimum wage for his time, with the balance of the end user’s payments being “lent” to him with the risk he might be asked at any time to repay the so called loan; (2) The loans were written off in the trust accounts, suggesting no expectation of repayment.[27]Discovery[28]From the documents before us and Officer Hargreaves’ oral evidence we found that:(1) HMRC investigated the tax position of users of the Darwinpay scheme using a process which was applied to a number of different contractor loan arrangements. The process is described in some detail in Sheth and in Hoey v HMRC [2019] UKFTT 489 (TC). The process involved in summary 3 steps, described as Standard Working Instructions (SWI’s). At Step 1 a caseworker would identify the value of the loans provided to the scheme user. The loan figure would be saved on a control spreadsheet. At Step 2, a caseworker would review the scheme user’s tax return (if any) and calculate the potential lost revenue (the ‘lost tax’ to be paid). The date of the calculation was recorded on the control spreadsheet. At Step 3 a caseworker would review the data held for the scheme user, including their tax return (if any), and would then use HMRC systems to create and issue an assessment.(2) So far as is material, this was the process followed in relation to Mr Bates. In 2013, HMRC had some information on Mr Bates, including a P14 and PIID submitted by Darwinpay Partnership for year ended 5 April 2011. Mr Bates had not submitted a self-assessment tax return for that year. Accordingly, the HMRC officer carrying out the enquiry discovered that there was a loss of tax. This discovery was made on 10 September 2013 and on 18 October 2013 another HMRC Officer issued the Assessment to Mr Bates.[29]Mr Bates challenged HMRC’s account of the making of the discovery, asserting that the documentary evidence and witness evidence did not identify a discovering officer, a discovery date, a concluded belief that a loss of tax had arisen or indeed that any discovery at all had been made. We were provided with an extract from HMRC’s records which Officer Hargreaves explained was derived from the control sheet relating to Mr Bates and we also had the benefit of Officer Hargreaves’ oral evidence. We found Officer Hargreaves to be a credible and reliable witness whose evidence was supported by the documentary evidence and the other witness statements in the bundle. While Officer Hargreaves was neither the officer who made the discovery nor the officer who issued the assessment, she was familiar with the process and we accepted her evidence that on 10 September 2013 an officer of HMRC made a discovery of a loss of tax in relation to Mr Bates and that on 18 October 2013 another HMRC officer issued the Assessment to Mr Bates.[30]It is worth recording that much of Mr Bates’ oral submission was to the effect that there were gaps in HMRC’s evidence and that we were being invited by HMRC to make inferences from the evidence before us. There was very limited force in that submission because, for the most part, HMRC had documents that showed exactly the steps in the chain of evidence for their case. But in any event, even if there were some points on which HMRC’s documentary evidence was slightly lacking, we were entitled to make inferences based on the documents and other evidence before us, especially where no contrary evidence was given. So an assertion that his appeal should succeed merely on the grounds we were being asked to make inferences was misconceived. We carefully considered the evidence before us and, where it was incomplete, drew inferences where it was appropriate to do so and justified by the evidence before us. Analysis Earnings

Analysis

[31]HMRC’s case was that the “Loans” of £69,030 received in 2010-11 by Mr Bates were earnings as defined in s62 ITEPA and liable to income tax. Mr Bates accepted he had received these amounts but contended that HMRC had not discharged the burden of proof of showing that these amounts were earnings and not (as he contended) loans which he might be obliged to repay. As noted above, we found as a fact that it was not credible that these amounts were loans. Rather, our finding of fact is that they were, as asserted by HMRC, viewed realistically sums provided by reason of and in return for Mr Bates’ services. The payments therefore had the character of employment income and it followed that the amounts were earnings within the meaning of s62.[32]That conclusion is consistent with the decision of the Supreme Court in RFC 2012 plc (in liquidation) (formerly Rangers Football Club plc) v Advocate General for Scotland [2017] UKSC 45 (“Rangers”). We understood that decision to be authority for the proposition that a payment made to a third party, including a trust, may constitute taxable earnings where it represents remuneration for the employee’s services. The employee’s absence of direct contractual entitlement to the relevant payment is not determinative.[33]We also considered in the alternative what would be the position if, contrary to our finding of fact that the “Loans” were never intended to be repaid, there was indeed an intention to repay and the Loans were genuine loans not outright payments to Mr Bates. We concluded that the outcome would be the same. It is clear that the Loans were funded from amounts redirected to the Darwinpay Trust by Mr Bates’ employer which would, in the absence of redirection, have been paid to him as salary liable to income tax. Rangers is authority for the proposition that the charge to income tax on employment income arises at the point at which salary is redirected from the taxpayer to a third party regardless of the form of that redirection. Accordingly, we would have found that an amount equal to the Loans was earnings for Mr Bates regardless of our finding that the Loans were not intended to be repaid.[34]To quote Rangers: “[41] As a general rule, therefore, the charge to tax on employment income extends to money that the employee is entitled to have paid as his or her remuneration whether it is paid to the employee or a third party. The legislation does not require that the employee receive the money; a third party, including a trustee, may receive it… [58] In summary,(i) income tax on emoluments or earnings is due on money paid as a reward or remuneration for the exertions of the employee;(ii) focusing on the statutory wording, neither s 131 of ICTA nor s 62(2)(a) or (c) of ITEPA, nor the other provisions of ITEPA which I have quoted (except s 62(2)(b)), provide that the employee himself or herself must receive the remuneration;(iii) in this context the references to making a relevant payment ‘to an employee’ or ‘other payee’ in the PAYE Regulations fall to be construed as payment either to the employee or to the person to whom the payment is made with the agreement or acquiescence of the employee or as arranged by the employee, for example by assignation or assignment;(iv) the specific statutory rule governing gratuities, profits and incidental benefits in s 62(2)(b) of ITEPA applies only to such benefits;(v) the cases, to which I have referred above, other than Hadlee, do not address the question of the taxability of remuneration paid to a third party;(vi) Hadlee supports the view which I have reached; and(vii) the special commissioners in Sempra Metals (and in Dextra) were presented with arguments that misapplied the gloss in Garforth and erred in adopting the gloss as a principle so as to exclude the payment of emoluments to a third party. [59] Parliament in enacting legislation for the taxation of emoluments or earnings from employment has sought to tax remuneration paid in money or money’s worth. No persuasive rationale has been advanced for excluding from the scope of this tax charge remuneration in the form of money which the employee agrees should be paid to a third party, or where [she/he] arranges or acquiesces in a transaction to that effect”.[35]We found as a fact that Mr Bates participated in the Darwinpay scheme and it was clear that as a participant, he was to be paid a small salary and to receive “loans” which in effect replaced the bulk of the salary which he would otherwise have received. Accordingly, Mr Bates was liable to income tax at the time at which the payments from the end users were redirected from The Darwinpay Partnership, his employer, to the Darwinpay Trust, irrespective of whether the Loans were intended to be repaid (and indeed whether they were actually paid) or not. The tax liability had already arisen before the Loans were made. Even if we were wrong in our finding that the Loans were never intended to be repaid, Mr Bates would fail on this point.[36]In light of this conclusion, there was an insufficiency of tax in relation to Mr Bates for 2010-11 and the underlying facts required for making of a discovery assessment are established.

Discovery

[37]HMRC accepted that they needed to demonstrate that the statutory conditions (in s29 and s34 TMA) for a discovery assessment had been met.[38]The Assessment was made on 18 October 2013, within the time limit of s34 TMA of four years for tax year 2010-11. Accordingly, we found as a fact that the s34 condition was met.[39]The s29 requirements for a “discovery” were considered in Anderson v HMRC [2018] UKUT 159 (TCC), where the UT held at [11]:
“…the concept of a "discovery" by an officer involves the application of a subjective test, as to the officer's state of mind, and an objective test as to whether it is open to an officer to have that state of mind.”
[40]The UT set out the subjective test in the following terms at [28] “…Having reviewed the authorities, we consider that it is helpful to elaborate the test as to the required subjective element for a discovery assessment as follows:
“The officer must believe that the information available to [them] points in the direction of there being an insufficiency of tax.”
That formulation, in our judgment, acknowledges both that the discovery must be something more than suspicion of an insufficiency of tax and that it need not go so far as a conclusion that an insufficiency of tax is more probable than not.” “The officer must believe that the information available to [them] points in the direction of there being an insufficiency of tax.”[41]At [30], the UT sets out the objective test:
“The officer’s decision to make a discovery assessment is an administrative decision. We consider that the objective controls on the decision making of the officer should be expressed by reference to public law concepts. Accordingly, as regards the requirement for the action to be ‘reasonable’, this should be expressed as a requirement that the officer’s belief is one which a reasonable officer could form. It is not for a tribunal hearing an appeal in relation to a discovery assessment to form its own belief on the information available to the officer and then to conclude, if it forms a different belief, that the officer’s belief was not reasonable.”
[42]HMRC asserted that on 10 September 2013 an officer of HMRC made a discovery of an insufficiency of tax in relation to Mr Bates and on 18 October 2013 another HMRC Officer issued the Assessment to Mr Bates. We found as a fact that a discovery within the meaning of s29 TMA was made on 10 September 2013 and that on 18 October 2013 another HMRC Officer issued the Assessment to Mr Bates. We are therefore satisfied on the balance of probabilities that HMRC has established the necessary facts to support the Assessment.[43]Mr Bates argued, correctly, that Anderson and other authorities (such the Supreme Court at [71] in HMRC v Tooth [2021] UKSC 17 and the UT at [41] in Neil Pattullo v. HMRC [2016] UKUT 0270 (TCC)) mean that discovery requires a concluded belief by an individual officer of HMRC. That is correct. We found as a fact that HMRC had demonstrated that on the balance of probabilities on 10 September 2013 an individual officer of HMRC formed a concluded belief that in relation to Mr Bates for tax year 2010-11 an amount of income tax ought to have been assessed but had not been assessed. The discovery arose because the Loans received by Mr Bates for that tax year had not been declared or included as part of his total taxable income. We concluded that this belief was a reasonable one given the evidence before us. Accordingly both the subjective test and the objective test were met.[44]Mr Bates further argued that HMRC were also required to identify the officer who made the discovery and issued the assessment. That is not correct. There is nothing in s29 or the caselaw that requires HMRC to identify the officer who made the discovery. What HMRC have to do to prove a “discovery” for the purposes of an assessment of this kind is to show that an officer came to a conclusion that there was a possible insufficiency. It is not a requirement that HMRC have to identify or call the actual discovering officer in every case, although it may of course be easier for HMRC to discharge that burden if they do identify the officer and call them to give evidence. But that is not necessary. HMRC's task is to prove on the balance of probabilities, that an officer made the discovery relied on. We were satisfied from Officer Hargreaves evidence and the documents with which we were provided that HMRC had discharged that burden.[45]Mr Bates asserted that HMRC were inviting the Tribunal to infer that discovery must have occurred because an assessment was issued rather than bringing forward evidence to support that a discovery had been made. Mr Bates asserted this was inadequate based on Julian Lowe v HMRC [2024] UKFTT 826 (TC). We agree that merely advancing the Assessment as evidence of a discovery might have been inadequate. But in this case, we had the evidence of Officer Hargreaves – which we accepted – that a discovery had been made and accordingly the position was very different from Julian Lowe, where the court was not given adequate evidence of the fact of a discovery being made.[46]Mr Bates also asserted (based on Tooth) that s29 requires that something newly appears to an officer of HMRC. Based on Officer Hargreaves’ evidence and the documents before us, we found that the combination of pieces of the jigsaw put together by the officer who made the discovery on 10 September 2013 (the P14 and P11D, the lack of any self-assessment return from Mr Bates, etc) was more than sufficient evidence to show that on that date an officer of HMRC had newly discovered that there was an insufficiency of tax in relation to Mr Bates.

Mr Bates’ other submissions

[47]Mr Bates made a number of alternative arguments should he fail on his basic proposition that HMRC had not discharged the burden of proof in relation showing that the Loans were earnings within the meaning of s62; and that a valid discovery had been made.[48]Mr Bates’ principal collateral arguments were:(1) that the Assessment overcharged him;(2) it would give rise to double taxation owing to the operation of the Loan Charge legislation.[49]In relation to the first issue, the burden is on Mr Bates to show that he has been overcharged. In Bi-Flex Caribbean Ltd v Board of Inland Revenue (Trinidad and Tobago) (1990) 63 TC 515, at [522-523] [DB 1745], the Privy Council held: “The element of guess-work and the almost unavoidable inaccuracy in a properly made best of judgment assessment, as the cases have established, do not serve to displace the validity of the assessments, which are prima facie right and remain right until the taxpayer shows that they are wrong and also shows positively what corrections should be made in order to make the assessments right or more nearly right. It is also relevant, when considering the sufficiency of evidence to displace an assessment, to remember that the facts are peculiarly within the knowledge of the taxpayer”.[50]In Nicholson v Morris (H.M. Inspector of Taxes) [1976] STC 269, at [280] [DB 2215], the High Court found:
“Even supposing that I were myself to think that the amounts were wrong – and, as I have freely conceded, and as [Counsel for the Revenue] has freely conceded, they probably are wrong – what on earth could I or anybody else at this stage, in the total absence of evidence, substitute for them? The answer is that it is a complete and utter impossibility; and that is why, of course, the Taxes Management Act throws upon the taxpayer the onus of showing that the assessments are wrong. It is the taxpayer who knows and the taxpayer who is in a position (or, if not in a position, who certainly should be in a position) to provide the right answer, and chapter and verse for the right answer, and it is idle for any taxpayer to say to the Revenue, “Hidden somewhere in your vaults are the right answers: go thou and dig them out of the vaults.”
That is not a duty on the Revenue. If it were, it would be a very onerous, very costly and very expensive operation, the costs of which would of course fall entirely on the taxpayers as a body. It is the duty of every individual taxpayer to make [their] own return and, if challenged, to support the return [ ] made, or, if that return cannot be supported, to come completely clean, and if [she/he] gives no evidence whatsoever [she/he] cannot be surprised if [she/he] is finally lumbered with more than [she/he] has in fact received. It is [their] own fault that [she/he] is so lumbered”.[51]Mr Bates did not advance any actual evidence that the sums assessed in the Assessment were not received (indeed he admitted to receiving the £69,030). Mr Bates asserted, without evidence, that he did not recognise a figure of £3,224 shown on the Assessment as “benefits and expenses received”. Since Mr Bates was not giving evidence and there was no documentary evidence to support his assertion, there was nothing to displace the Assessment on this point.[52]Mr Bates also asserted that the operation of the loan charge legislation (by which we understood him to mean the provisions of inter alia Finance (No. 2) Act 2017 targeting "disguised remuneration" schemes) would lead to double taxation if the Assessment was to stand. We considered that this was not a matter within our jurisdiction in relation to this appeal. In any event, HMRC told us that the operation of the Loan Charge provisions would not give rise to double taxation because this Assessment would be taken into account in any calculations under the loan charge provisions.[53]In various of the many documents before us, Mr Bates sought to raise other collateral points, but these were not pursued by him at the hearing. From our review of these documents, none of the collateral points gave rise to arguable issues that would have made a difference to the outcome of the appeal.

Conclusion

[54]We found that:(1) the Loans, or amounts equivalent to them, are taxable employment income,(2) the Assessment was a valid in time assessment,(3) Mr Bates had not evidenced that he was overcharged and his collateral arguments did not give grounds to allow the appeal.[55]Accordingly, we dismiss the appeal.

Right to apply for permission to appeal

[56]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: 05 August 2026