In the tax tribunal case of Cenkci vs HMRC HMRC held information suggesting that the taxpayer had made property purchases and sales over a number of tax years but none had been reported on his tax returns. On 20 July 2020, HMRC issued discovery assessments for five tax years to collect the tax it believed had been underpaid.
The validity of the assessments was not the subject of the case, only whether the appeals against the assessments had been submitted in time and, if not, whether late appeals could be accepted. The agent firm alleged that it had taken steps to appeal the assessments within the 30-day time limit, but this was not the end of the matter.
When a discovery assessment is issued by HMRC, the taxpayer (or an agent acting on their behalf) has 30 days from the date of issue of the assessment to submit an appeal in writing to HMRC. In this case, the taxpayer’s agent stated that appeals were submitted seven days after the assessment date, and therefore were in time. However, HMRC contended it had not received the appeals.
The burden of proof for evidencing that an appeal has been submitted to HMRC rests with the taxpayer, an important point for both taxpayers and agents to remember. Many appeals need to be physically posted to HMRC, rather than emailed – a frustrating point when in other areas HMRC is moving forward with digitalisation of the tax system. In this case, the agent had not helped itself – it had kept no proof of posting, there was no communication advising the client what action it had taken regarding the assessments and no contemporaneous file note had been made that the appeals had been submitted.
Having reviewed all the facts available to it, the tribunal considered that the appeals had not been made and refused permission for late appeals to be made. Importantly, while the burden of proof to demonstrate an appeal has been submitted rests with the taxpayer, if this standard is met the burden of proof moves to HMRC if it disputes receipt of the communication. Had the agent kept better documentary evidence of submission, the basis of the tax assessed by HMRC could have been considered against the facts and negotiated as appropriate with HMRC, and the taxpayer could have had a more favourable outcome.
In the weeks before the end of any tax year, HMRC may be expected to issue many protective assessments to assess tax for years that will otherwise no longer be assessable once the normal time limits have passed. The weeks running up to 5 April 2023 are no exception.
This case provides a salient lesson for taxpayers (and their agents) to not only identify the date by which appeals must be submitted, but to also take steps to ensure that proof of submission is retained, otherwise they could find themselves in the same unappealing situation as Mr Cenkci.
