A special commissioner upheld the Revenue's refusal to allow a claim for expenses to be deductible in computing the taxpayer's profits where he had failed to provide any evidence to show that he had been overcharged by an amended self-assessment.

Facts

The taxpayer started business as a self-employed general builder on 6 February 2003. The tax inspector opened an enquiry into the taxpayer's self-assessment for 2003-04 on 31 August 2005. The inspector asked for sight of the business books. They were not provided and so he issued a notice under TMA 1970, s. 19A on 5 October 2005. That was not complied with and a £50 penalty was imposed on 1 December 2005. No further information was ever supplied by the taxpayer. The inspector was concerned about the following:

£3,867 for cost of sales because the CIS25 vouchers did not include any payment for materials; subcontractor costs of £470 because the taxpayer was not registered to make payments to subcontractors; other direct costs of £4,802 about which she had no information; employee costs of £2,210 because the taxpayer was not registered for PAYE; premises costs of £2,288 which she thought unlikely to have been incurred; and various other expenditure. The closure amendment was to add back the cost of sales, subcontractor costs and other direct costs and 90 per cent of the indirect costs apart from accountancy fees of £720 which she allowed in full.

The taxpayer had tried to obtain the business records from his previous accountants without success. On 22 March 2007 the commissioner directed both parties to provide any documents, witness statements and skeleton arguments 14 days before the hearing. The Revenue complied fully but nothing was provided by the taxpayer.

The taxpayer appealed against an amendment to his self-assessment for 2003-04. He contended that it was up to the Revenue to prove the amendments to the self-assessment and the accounts prepared by his accountants were correct.

The Revenue contended that the burden, which he had failed to discharge, was on the taxpayer to show that the figures in the amended self-assessment were wrong.

Issue

Whether the expenses were deductible in computing the taxpayer's profits for the year ended 5 April 2004.

Decision

The special commissioner (Dr John Avery Jones) (dismissing the appeal) said that the taxpayer had provided no evidence from which it could be concluded that he had been overcharged by the amended self-assessment and accordingly it had to stand good. The taxpayer had been given time to obtain secondary evidence of expenditure, such as bank statements, but had declined the invitation.

Accordingly the amendment to the taxpayer's self-assessment (tax and NIC due of £9,659.81) would be confirmed.

(2008) Sp C 676.

Decision released 4 April 2008.