Shakoor v Revenue and Customs Commissioners [2012] UKFTT 532 (TC)

What is the position if your accountant is negligent and you end up being liable for a fine as a consequence? In this case the taxpayer appealed against a penalty of 70% levied on assessment of capital gains tax (“CGT”).  The penalty was 70% of the amount of capital gains that should have been paid.

The taxpayer claimed the penalty should be reduced to nothing because the failure to pay the CGT was as a consequence of negligence rather than fraud.  He alleged the negligence was that of his accountant and not himself.

He submitted that he had queried whether or not that was the correct position, but had been advised by his accountant that the disposal should be exempt from CGT and there was no need to refer to them in his tax return.

The Tribunal held that a taxpayer who took proper and appropriate professional advice to ensure that his tax return was completed correctly and acted in accordance with that advice, as long as it was not obviously wrong, would not have engaged in negligent conduct.  In this case, however, the Tribunal found it hard to believe that the tax payer had not realised or ought to have realised that the accountant’s advice was obviously wrong, or so potentially obviously wrong that he should have queried it or taken alternative advice, and as a consequence the penalty was due.

The Tribunal did, however, reduce it down to 30%.

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