“(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 ... [has] not been assessed or (b) that an assessment to tax is or has become insufficient, ... the officer or, as the case may be, the Board may, subject to (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. … (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.[2011] UKUT 270 (TCC) (4) The first condition is that the situation mentioned in subsection (1) above is attributable to fraudulent or negligent conduct on the part of the taxpayer or a person acting on his behalf.”
“Each of the accountants who appeared before us accepted that it was mandatory to follow applicable published accounting standards in the preparation of accounts designed to give a true and fair view. It was clear to us that the accounting standards which were in force at any time formed the basis for generally accepted accounting practice at that time, and if the actual accounts prepared for an enterprise differed materially from accounts which had been prepared on the basis of those standards, then those actual accounts would not show a true and fair view unless there were exceptional circumstances justifying a departure from the standards in order to ensure the presentation of a true and fair view.”
“(b) the ‘accruals’ concept: revenue and costs are accrued (that is, recognised as they are earned or incurred, not as money is received or paid), matched with one another so far as their relationship can be established or justifiably assumed, and dealt with in the profit and loss account to which they relate; provided that where the accruals concept is inconsistent with the ‘prudence’ concept (paragraph (d) below), the latter prevails. The accruals concept implies that the profit and loss account reflects changes in the amount of net assets that arise out of the transactions of the relevant period … . Revenue and profits dealt with in the profit and loss account are matched with associated costs and expenses by including in the same account the costs incurred in earning them (so far as these are material and identifiable); (c) the ‘consistency’ concept: there is consistency of accounting treatment of like items within each accounting period and from one period to the next; (d) the concept of ‘prudence’: revenue and profits are not anticipated, but are recognised by inclusion in the profit and loss account only when realised in the form either of cash or other assets the ultimate cash realisation of which can be assessed with reasonable certainty; provision is made for all known liabilities (expenses and losses) whether the amount of these is known with certainty or is a best estimate in the light of the information available.”
“Basic Principles G4. A seller receives revenue under an exchange transaction with a customer, when, and to the extent that, it obtains the right to consideration in exchange for its performance. At the same time, it typically recognises a new asset, usually a debtor. … G6. A seller may obtain a right to consideration when some, but not all, of its contractual obligations have been fulfilled. Where a seller has partially performed its contractual obligations, it recognises revenue to the extent that it has obtained the right to considerations through its performance.”
“The absence of a UK standard dealing explicitly with revenue recognition has been a source of muted criticism for some time. Different entities and industries have followed practices that are in some respects inconsistent with one another. More generally, there are different views of what revenue is or represents, and of how financial statements should portray a business’s operating activities. In practice, those seeking guidance on whether or when to recognise revenue have turned to International Accounting Standards (IAS) or accounting standards adopted in the United States. The international standard, IAS 18 ‘Revenue’, was originally issued in 1982 and substantially revised in 1993. …”
“Since the ASB issued Application Note G: Revenue Recognition, as an Amendment to FRS 5, ‘Reporting the Substance of Transactions’ (‘Application Note G’) in November 2003, questions have arisen about the accounting for revenue (ie turnover) from contracts to provide services, and the UITF has been asked to provide guidance. Although many of these requests specifically refer to services rendered by professional service firms (for example, firms of accountants and solicitors), the UITF believes the same principles should be applied in accounting for all service contracts. This Abstract therefore applies to all contracts for services.”
“A material post balance sheet event requires changes in the amounts to be included in financial statements where: (a) it is an adjusting event; …”
“The primary issue in accounting for revenue is determining when to recognise revenue. Revenue is recognised when it is probable that future economic benefits will flow to the entity and these benefits can be measured reliably. This Standard identifies the circumstances in which these criteria will be met and, therefore, revenue will be recognised.”
“It is clear to us therefore that, save in exceptional circumstances, after 1994 accounts which were to show a true and fair view had to be prepared upon the accruals basis and that that basis required the recognition of assets (as access to future economic benefits controlled by the entity) where there was sufficient evidence of the existence of those assets and they could be measured as monetary amounts with sufficient reliability.”
“If the case contains anything ex facie which is bad law and which bears upon the determination, it is obviously, erroneous in point of law. But, without any such misconception appearing ex facie, it may be that the facts found are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal. In those circumstances, too, the court must intervene.”
“There is a well-recognised need for caution in permitting challenges to findings of fact on the ground that they raise this kind of question of law. … It is all too easy for a so-called question of law to become no more than a disguised attack on findings of fact which must be accepted by the courts. As this case demonstrates, it is all too easy for the appeals procedure to the High Court to be abused in this way. Secondly, the nature of the factual inquiry which an appellate court can and does undertake in a proper case is essentially different from the decision-making process which is undertaken by the tribunal of fact. The question is not, has the party upon whom rests the burden of proof established on the balance of probabilities the facts upon which he relies, but was there evidence before the tribunal which was sufficient to support the finding which it made? In other words, was the finding one which the tribunal was entitled to make? Clearly, if there was no evidence, or the evidence was to the contrary effect, the tribunal was not so entitled. It follows, in my judgment, that for a question of law to arise in the circumstances, the appellant must first identify the finding which is challenged; secondly, show that it is significant in relation to the conclusion; thirdly, identify the evidence, if any, which was relevant to that finding; and fourthly, show that that finding, on the basis of that evidence, was one which the tribunal was not entitled to make. What is not permitted, in my view, is a roving selection of the evidence coupled with a general assertion that the tribunal’s conclusion was against the weight of the evidence and was therefore wrong.”
‘The need for appellate caution in reversing the judge's evaluation of the facts is based upon much more solid grounds than professional courtesy. It is because specific findings of fact, even by the most meticulous judge, are inherently an incomplete statement of the impression which was made upon him by the primary evidence. His expressed findings are always surrounded by a penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance (as Renan said, la vérité est dans la nuance), of which time and language do not permit exact expression, but which may play an important part in the judge's overall evaluation. It would in my view be wrong to treat Benmax as authorising or requiring an appellate court to undertake a de novo evaluation of the facts in all cases in which no question of the credibility of witnesses is involved. When the application of a legal standard such negligence or obviousness involves no question of principle but is simply a matter of degree, an appellate court should be very cautious in differing from the judge's evaluation.’ [72] Similar expressions have been used in relation to similar issues. The principle has been applied in Pro Sieben Media v Carlton[1999] 1 WLR 605 at pp. 613-614 (per Robert Walker LJ) in the context of a decision about ‘fair dealing’ with a copyright work; by Hoffmann LJ in Re Grayan Building Services[1995] Ch 241 at p.254 in the context of unfitness to be a company director; in Designer Guild v Russell Williams[2000] 1 WLR 2416 in the context of a substantial reproduction of a copyright work and, most recently in Buchanan v Alba Diagnostics[2004] UKHL 5 in the context of whether a particular invention was[2011] UKUT 270 (TCC) an ‘improvement’ over an earlier one. Doubtless there are other examples of the approach. [73] It is important here to appreciate the kind of issue to which the principle applies. It was expressed this way by Lord Hoffmann in Designer Guild: ‘Secondly, because the decision involves the application of a not altogether precise legal standard to a combination of features of varying importance, I think that this falls within the class of case in which an appellate court should not reverse a judge's decision unless he has erred in principle.’
“ … This is an expert tribunal charged with administering a complex area of law in challenging circumstances. To paraphrase a view I have expressed about such expert tribunals in another context, the ordinary courts should approach appeals from them with an appropriate degree of caution; it is probable that in understanding and applying the law in their specialised field the tribunal will have got it right: see Cooke v Secretary of State for Social Security[2002] 3 All ER 279 , para 16. They and they alone are the judges of the facts. It is not enough that their decision on those facts may seem harsh to people who have not heard and read the evidence and arguments which they have heard and read. Their decisions should be respected unless it is quite clear that they have misdirected themselves in law. Appellate courts should not rush to find such misdirections simply because they might have reached a different conclusion on the facts or expressed themselves differently. … ”
“… even if the method was used for other construction Companies, and even if its use for them was generally accepted accounting practice, we do not see why that meant that it should apply in Mr Smith's circumstances.”
“The self billing procedure played a role in the correspondence between the parties, and was suggested as support for ensuring consistency between the VAT records and the accounting/income tax records. However the VAT rules and procedures appear to us to have no relevance to the determination of the issues before us because we do not accept that VAT administrative treatment influenced generally accepted accounting practice.”
“The income recognition question is whether income should have been recognised for accounting purposes at the time when the application for payment was made, or at the time when the valuation certificate was issued. This is in essence the question, whether the applications for payment gave rise to ‘other assets’ within SSAP 2 para 14(d) (as the Tribunal held) or whether (as Mr Tidbury and the Appellant’s expert witness Mr Elsworth argued), only the valuation certificates gave rise to ‘other assets’ in this sense, because they were not self-produced but arose from transactions with third parties.”
“It seems to us that a person who acts for another person as an accountant and tax adviser should reasonably be expected to show the normal competence associated with the proper discharge of the duties of an accountant and tax adviser. The failure to do what an ordinarily competent adviser would do is failure to do what ought to be done. … It would thus be negligent conduct .... This is not the same as saying that because a person is a qualified accountant he is to be expected to display by virtue of his training and qualification a greater standard of care; it is saying that because of the role he occupies he should reasonably be expected to display the kind of care which a person in that role would ordinarily display.”