Delphi Derivatives Limited v The Commissioners for HMRC
Decision date: 21 December 2023
Neutral citation: [2023] UKFTT 722 (TC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
This appeal concerned Schedule 24 FA 2007 penalties assessed against Delphi for inaccuracies in P35 PAYE returns arising from four tranches paid into a Clavis/Herald EBT. The Tribunal found the returns understated PAYE/NICs, held tranches 1–3 were careless (failure to take reasonable care) and tranche 4 deliberate, and dismissed the appeal, affirming HMRC’s penalties totaling £1,572,260.16.
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: medium
The Tribunal held that once HMRC proves an inaccuracy given on the taxpayer’s behalf, para 18(3) Sch 24 reverses the evidential burden so the taxpayer must show it took reasonable care; “due to” in para 3(1) requires attribution/accountability to the failure to take reasonable care but does not import a tort-style “but for” causation; and the standard of reasonable care is that of a prudent and reasonable taxpayer in the taxpayer’s position, combining objective and subjective elements.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The Tribunal suggested that contemporaneous documents are generally more reliable than distant witness recollection; reports such as the Morse Loan Charge Review have limited weight in assessing contemporaneous taxpayer conduct and do not substitute for direct evidence of prevailing practice; and that failure to follow adviser recommendations (notably to obtain independent counsel when litigation risk is described as near certain) may be strong evidence of lack of reasonable care.