14 March 2023
The Cenkci vs HMRC case concerned a taxpayer where HMRC held information suggesting the taxpayer had made property purchases and sales over a number of tax years, but none were reported on his tax return. On 20 July 2020, HMRC issued discovery assessments for five tax years to collect the tax it believed was at stake. The agent alleges they took steps to appeal the assessments within the 30-day time limit, but this was not the end of the matter.
The validity of the assessments was not the subject of the case before the first tier tribunal, only whether the appeals against the assessments had been submitted in time and if not whether late appeals could be accepted.
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 an appeal was submitted to HMRC seven days after the assessment date, and so was in time. However, HMRC contended it had not received the appeal.
The burden of proof for evidencing 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, not emailed – a frustrating point when HMRC is taking steps for tax to ‘go digital’. In this case, the agent had not helped themselves – they had kept no proof of posting, there was no communication advising their client the appeals had been submitted and they did not make a contemporaneous file note that the appeal had been submitted.
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 tax at stake could have been negotiated with HMRC and the taxpayer could have had a more favourable outcome.
With the tax year end fast approaching there may be a large number of protective assessments being issued by HMRC in the next couple of weeks to assess tax for years that will otherwise no longer be assessable after 5 April 2023.
This is a salient lesson for taxpayers (and their agents) to not only identify the date by which appeals must be submitted, but also take steps to ensure that proof of submission is kept, otherwise they could find themselves in the same situation as Mr Cenkci – unappealing!