So it’s not just me then!

You know what I get all the time when people hear my story?

It’s, “Oh, you were investigated by an overzealous inquiry officer, HMRC are stamping that out now…” or “You were unlucky, financial pressures mean that ‘small businesses’ are now less in the spotlight, HMRC is going after the fat cats.”

Both of these are untrue, I believe that HMRC is getting tougher and more dirty on all levels. This story about London cabbie Mr Ho illustrates this…

Mr Ho was a London cabbie operating out of Heathrow. HMRC’s enquired into his 2003/4 return and:

• undertook a cash flow test
• assumed a pattern of working
• estimated* private expenses to discredit accounts and rebuild annual turnover.

Based on this the officer made discovery assessments for an additional six years.

The First–tier Tribunal found for Mr Ho who was seen as “an honest, straightforward and truthful witness”. They found the errors HMRC had used to discredit the records were accidental and insufficient to amount to negligence. They rejected HMRC’s methods and accepted that there was no 2003/4 under-assessment.

The credibility of the taxpayer was contrasted with HMRC’s behaviour. Costs were sought by Mr Ho and the First–tier Tribunal gave a strong indication that costs would be awarded.

Full Tribunal report here.

*ie made a fanciful guesstamate