TC09535 - [2025] UKFTT 00595 (TC)

We were provided with a bundle of documents. HMRC Officer Arlene Kane (“OfficerKane”), the assessing officer, provided a witness statement on which she was briefly cross-examined by the appellant. The appellant gave oral evidence on her own behalf. From the foregoing evidence we find as follows:

The property was purchased in October 2013 by the appellant and her former husband with the benefit of a mortgage from Handelsbanken.

Throughout the relevant tax years, it was jointly owned by the appellant and her former husband.

The appellant’s evidence was that the property was sold during the first Covid lockdown in, she thought, July 2020.

In February 2015 the appellant’s former husband went abroad to Bangkok on business. Before he left, he executed a power of attorney in her favour (“the power of attorney”).

The power of attorney is dated 2 February 2015. By it, her former husband appoints the appellant as his attorney and grants her certain powers including the powers: to execute and deliver deeds and documents including those required to sell the property; to maintain and pay any expenses in connection with the property; to buy lease sell and otherwise deal with any interest in the property; and to sign seal and execute any documents in connection with the property.

The immediate purpose of the power of attorney was to enable the appellant to sell the property whilst her former husband was away, given that he was not sure how long he would be away for.

In October 2015 the appellant and her eight-year-old son visited her former husband in Bangkok for about a fortnight. Following that visit, during 2016, communications between the appellant and her former husband became erratic and in November 2016 communications ceased completely following a telephone call made by the appellant in which her former husband swore at her and then hung up. The appellant’s evidence was that it seemed evident to her at that time that their marriage was clearly over.

Her former husband was not making any financial provision for either the appellant or their son and was not paying the mortgage payments. A loan had also been taken out to purchase solar panels. 60 solar panels were installed on the ground and 30 on the roof of the property. Before her former husband left, he sold the 60 ground panels. The money for that sale was not used to discharge the outstanding loan for the solar panels. Repayments of this loan also ceased following his departure. However, the appellant was notified by Handelsbanken that her former husband had a card which enabled him to access the Handelsbanken current account, and he was taking money out of it whilst abroad. The bank, at her request, then withdrew this facility.

In order to make ends meet, the appellant took some part-time jobs and considered selling the property. But following discussions with Handelsbanken, in February 2017, the appellant received permission to let the property out, which he then did until shortly before its sale in July 2020.

She paid the rental income into a separate bank account (with the TSB). The reason for this was to ensure that her former husband had no access to that income. She used the income to bring up their child, and to pay day-to-day expenses. The property was essential to generate income to keep the family’s head above water.

The appellant borrowed money from her mother and stepfather in order to maintain repayments to Handelsbanken.

During the period when the property was let out, the last thing on the appellant’s mind was to complete a tax return. She was simply trying to make ends meet and bring up a child and to pay day-to-day living expenses. It never occurred to her to complete and submit a tax return. Furthermore, she had no idea whether her former husband was still alive, let alone where he was or what he was doing. It was not until, she thought, 2018, when, through solicitors, there was confirmation that he was still alive.

In a letter to the appellant dated 18 February 2019, BTO solicitors informed her that they had been instructed by her former husband in connection with their matrimonial separation. They went on to say that they had been instructed that they had separated in or around November 2016 and he was keen to make progress in resolving financial issues. The solicitor’s understanding was that the property was being marketed for sale and went on to say that “Notwithstanding the fact that you are separated our client was surprised that he was not consulted about this. Our client would like to consider other alternatives available to selling the propert[ies]y such as the possibility of retaining it and continuing to rent it on Airbnb as you do presently thus retaining a regular income…”.

Following receipt of this letter, the appellant instructed solicitors, and following the sale of the property and discharge of the secured loans, the equity of approximately £70,000 was used to pay off a variety of financial debts which the appellant had incurred, including those to her mother and stepfather, cash loans to her husband, discharge of the solar panel loans, conveyancing and estate agent costs and shortfall in the sale of a second property and discharge of a bridging loan.

The appellant and her son then moved into the house owned by her mother and stepfather where the four of them currently reside.

In December 2022, Officer Kane started to check the appellant’s sources of income for the relevant tax years. In January 2023, the appellant provided information to HMRC regarding the lettings of the property and explained the position with Handelsbanken.

The appellant provided relevant documents to Officer Kane, together with details of the rental income, during the spring and summer of 2023. On 14 August 2023, HMRC issued their pre-decision letter which summarised their view of the matter and provided calculations for the appellant’s tax liability for the relevant tax years.

In an email dated 3 September 2023, the appellant agreed the figures but explained that throughout the period in which the property was let out, she was acting under a power of attorney, jointly with her former husband, and asked that half of the tax assessment should be directed to him.

In response, Officer Kane explained that in order for her to consider apportioning half of the tax to her former husband, the appellant needed to provide proof that he had benefited from half of the rent during the relevant period.

In an email dated 17 September 2023, the appellant explained to Officer Kane that during this period, and with the knowledge of her former husband and with the benefit of the power of attorney, various joint liabilities were paid. These included the mortgage and the solar panel loan together with hire purchase liabilities taken out in her former husband’s sole name, and settling financial support loans from her mother totalling over £70,000. These were liabilities of her former husband, and also included money that it was his responsibility to pay towards their son’s upkeep.

Officer Kane was not persuaded that the appellant’s former husband was liable to pay half of the tax on the basis that she did not feel that the appellant’s former husband had benefited from the rental income and accordingly issued the discovery assessments on 2 October 2023. The discovery assessment for the tax year 2017/2018 was for £1,820.20. The assessment for 2018/2019 was for £4,510.82, and that for the tax year 2019/2020 was for £4,417.56.

On 2 November 2023, the appellant appealed to HMRC against the assessments on the basis that her liability should be reduced by 50% and that her former husband is liable for the balance. Furthermore, the solar panel loan repayments should be included as a revenue expense as these were a liability against the income. She was offered, and accepted, a statutory review. On 26 April 2024, HMRC issued their review conclusion letter which upheld the discovery assessments, following which on 26 May 2024, the appellant lodged her appeal with the tribunal.

Officer Kane’s evidence was that she had made a discovery of the loss of tax when the tax calculations were sent initially to the appellant on 3 September 2023. She also explained that in light of the fact that she had been told by the appellant that the solar panels had been removed before the beginning of the letting of the property, repayment of any loans could not be classed as a revenue expense of the property letting.