Taxpayer Who Used Tax App Loses Appeal Against Discovery Assessments

If you need assistance with your tax affairs, you should always ensure you deal with appropriately qualified and regulated advisors. Recently, the First-tier Tribunal (FTT) upheld discovery assessments raised against a taxpayer who claimed travel and subsistence expenses through a tax refund company.

The taxpayer had been employed in various roles and paid Income Tax via PAYE. He contacted HM Revenue and Customs (HMRC) to enrol for self-assessment as he wished to claim expenses of more than £2,500. He entered his self-assessment information for four tax years into the tax refund company's app, and the company submitted tax returns on his behalf. He did not see what was in the returns but believed that the company was only making claims for business travel and subsistence expenses that he was entitled to make. The claims led to a repayment of £3,255 in respect of three of the tax years, of which the company retained £1,163.

After contacting HMRC to chase the repayment for the fourth tax year, he received a letter from an officer of HMRC stating that he might not be entitled to the expenses he had claimed. The officer subsequently raised discovery assessments totalling £4,436 in respect of the four tax years. After a review by HMRC upheld the discovery assessments, the taxpayer appealed to the FTT.

Considering whether the claims were allowable under Sections 336-338 of the Income Tax (Earnings and Pensions) Act 2003, the FTT noted that there was no evidence that the taxpayer had been obliged to incur the expenses as a holder of his employment, or that they had been incurred in the performance of his duties. A spreadsheet he had provided to HMRC indicated that the journeys had been from his home, and his assertion that some of them were to temporary workplaces was not supported by any documentary evidence. The FTT found that the claims were not allowable.

In the FTT's view, a reasonable taxpayer would have done more than rely wholly on the advice from the tax refund company, such as consulting legislation or HMRC guidance on commuting expenses or asking the company to explain why the expenses were recoverable. This would have prevented the claims from being made. The FTT was therefore satisfied that the taxpayer had failed to take reasonable care to avoid bringing about an insufficiency of tax, and so had been careless for the purposes of Section 29(4) of the Taxes Management Act 1970.