Date mistake could cost HMRC dear

A man accused of avoiding more than £650,000 in tax this week won an appeal against HM Revenue & Customs (HMRC), after it emerged that the tax authority had put the wrong date on an enquiry note.

A tribunal ruled that the error – which concerned a reference to a non-existent tax year – was sufficient to invalidate the document.

The case related to a taxpayer alleged to have taken part in a tax avoidance scheme in the financial year to April 2009. Two years later, HMRC sent the correspondence to inform him that his return was being examined.

The tax authority had tried to argue that the date given was only one day out, and should thus be classed as a minor error – not serious enough to invalidate the notice.

But the argument was refuted by the tribunal judge Jayne Bailey.

“The return which was described in the letter of 17 January 2011 is for a tax year which does not exist,” she said.

“We conclude that the disputed notice of enquiry is not in substance and effect in conformity with the intent and meaning of the Taxes Acts.”

The case is fairly unusual and some experts have voiced their surprise that HMRC did not check the letter more thoroughly, given the sum of money involved.

An HMRC spokesman said it was disappointed with the tribunal’s decision and would consider an appeal.

“HMRC wins around 80 per cent of avoidance cases that are taken to litigation by the taxpayer and many more settle with us before reaching that stage,” they added.

“We tackle avoidance wherever we see it and litigate where necessary to ensure schemes are defeated and the tax due is paid.”