Rao Mohammed Hassan Khan v The Commissioners for HMRC
Decision date: 12 December 2025
Neutral citation: [2025] UKFTT 1553 (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 whether invoiced but unpaid rent must be included in "profits arising in the tax year" for 2016‑17 and 2017‑18 where property profits are calculated under GAAP (accruals basis). The Tribunal held that, for GAAP‑based property businesses, "profits arising in the tax year" means profits accruing in that year, so accrued but unpaid rent is included under s 27 ITTOIA, and the appellant's original returns were not excessive. The appellant's Schedule 1AB claims and credit note issued in 2020 did not alter the earlier years' tax position; the appeal was dismissed and HMRC's closure notices confirmed.
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
In the context of a property business whose profits are computed in accordance with GAAP (i.e. on an accruals basis), the statutory phrase "profits arising in the tax year" in s 270 ITTOIA should be read to mean profits accruing in that tax year; amounts brought into account as receivables under s 27 are included even if not actually received.
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 decision observes (without determining binding principles beyond the GAAP context) that authorities about when "income" such as interest or dividends arises are not directly dispositive of when "profits arising" arise for GAAP‑based property profits, and that issuing a credit note is tax‑mechanically different from taking a bad‑debt deduction, which is generally allowable in the year the debt becomes bad.