TC09512 - [2025] UKFTT 00522 (TC)

On the basis of our factual findings we consider that HMRC were right to refuse to make the income adjustments claimed to banked cash when determining the commission income from the recruitment business. Thus the basis of assessment for commission income is sound.

We also consider that there is no evidence permitting a claim for deductible expenses in respect of UK travel or accountancy services received (in the latter instance regarding either the recruitment business or property businesses).

We accept that there is evidence, in the form of passport stamps, of travel to Bangladesh. However, there is no evidence of the purpose of such travel and as a consequence that it was wholly and exclusively incurred for the purposes of either the recruitment business or the overseas property business. We know that at least NN had family in Bangladesh and we conclude that even were there evidence of the expenditure incurred such expenditure would not meet the statutory requirements of section 34(a) Income Tax (Trading and Other Income) Act 2005.

Regarding the claimed deductions to property income we took the view (and communicated it in the hearing) that there was evidence within the bundle which supported a deduction for mortgage interest. Whilst only NN had made a claim for deduction, on the basis of the documents it was reasonable to expect HMRC to calculate the interest payments made in respect of both Flansham House when let post 2012 and Brixham Street. HMRC calculated the interest which was evidenced and agreed to allow the expense.

We also accept that as the properties were let and mortgaged there must have been safety certificates and insurance costs incurred. There was no evidence as to the cost so incurred other than that claimed by the Appellant. HMRC were prepared to accept that some notional deduction be permitted (£100 for Flansham House and £150 for Brixham Road for each of insurance and gas/electricity certificates for each property) but considered the amounts claimed by the Appellants were unsubstantiated. Whilst we consider that it would have been open to us to simply conclude that the Appellants had failed to meet the burden of proof on them to claim any sum in respect of these matters in the interests of fairness, we consider it appropriate to allow the nominal deduction of £100pa for each of insurance and gas/electricity certificates for each let property.

In the hearing we expressed the view that we considered it unreasonable for HMRC to rescind from the view taken by the reviewing officer that a 10% adjustment be given in connection with the overseas rental property. This was on the basis that no new information or evidence had come to light since the review conclusion letter and it simply a case of Mr Price reinterpreting the evidence available and forming a different view. Whilst section 50(7) TMA provides jurisdiction for us to increase an assessment, we consider that we should exercise that discretion with some caution with upward adjustments (even within an overall reduction of assessments) should be based on new evidence or material not previously considered by HMRC but affecting the quantum of assessments. HMRC accepted that position.

When we gave that indication, we had not appreciated that Mr Price had also revised the assessment calculation to increase the assessable income received from the overseas property from that determined by the reviewing officer. The reviewing officer had accepted that the income was as stated by NN; Mr Price invited that the assessable income be determined by the higher amounts declared by SA We have reflected on whether it is appropriate to permit this adjustment. Whilst we can see that there is a logic to the adjustment and Mr Price’s position is an entirely reasonable one, the discrepancy between the disclosed figures was apparent to both Mr Hartop and the reviewing officer. Mr Hartop assessed on the basis of an imputed figure and the reviewing officer accepted the disclosed amounts for NN applying them to SA. As with the 10% adjustment there was no new evidence available to Mr Price, he simply interpreted the information differently. We do not therefore consider it appropriate to allow HMRC to use the appeal process as a means of revising the Assessments (or elements of them) upwards in this regard and we consider that the assessment calculation should, in this regard, remain as per the review conclusion.