Timothy Johnson & Anor v TThe Commissioners for HMRC
Decision date: 4 May 2022
Neutral citation: [2022] UKFTT 156 (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 discovery assessments raised by HMRC after the appellants received substantial NatWest redress payments which their agent (Mayfield & Co / Mr Green) did not include as taxable income in the 2013/14 self-assessments, instead making a white-space disclosure. The First-tier Tribunal found that, although the agent acted in good faith, he failed to take the care of a reasonably competent tax adviser in not undertaking sufficient fact-finding and so his carelessness caused the loss of tax; the appeals were dismissed and the discovery assessments upheld.
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: high
An agent’s honest belief or good faith does not by itself satisfy the statutory duty to take reasonable care; a reasonably competent tax adviser must undertake adequate fact-finding and apply relevant guidance where significant redress payments and clear indicators (such as prior tax deductions for finance costs) point to likely taxability. A white-space disclosure does not automatically absolve an agent of that duty or shift causation to HMRC where the agent failed to return taxable income that guidance indicated was likely taxable.
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 observed that practical considerations such as the “symmetry” between previously claimed deductions and compensation received are relevant to what an experienced adviser should investigate, and that relying solely on a subset of HMRC guidance without probing obvious factual links (for example, the connection between loan-financing and rental income) may be insufficient to avoid a finding of carelessness.