TC09619 - [2025] UKFTT 01020 (TC)

During the tax years in question, the appellant was employed by Arriva as a bus driver.

On 8 November 2016, the appellant was involved in a road traffic accident. He was off work for three weeks.

The history of the appellant’s tax returns and amendments thereto for some of the tax years in question is set out in Appendix 2. The appellant did not challenge this history which we find as a fact.

In a letter dated 10 February 2022 to Officer Bennett, the appellant attached copies of bank statements, explained that he had borrowed £18,000 to spend on PPE, explained further that as a bus driver he was a key worker and was at the forefront of exposure to the Covid virus, explained that his loft storage had been infested by rodents which caused profound damage, and ended by saying that “I sincerely offer my submissions. Taking into account, the emergency that was in place at the beginning of year 2020”.

An email from Arriva to HMRC dated 18 August 2022, in response to HMRC’s letter to them of 5 August 2022, stated that the appellant had not received any expenses from Arriva. A further email dated 24 August 2022 confirmed that if the appellant did have any expenses, he would be fully reimbursed.

In a letter dated 16 September 2022, HMRC told the appellant that Arriva had confirmed to them that he was not required to incur any expenses for his duties and that he could amend his tax returns accordingly. It also stated that “Any decision to amend your self-assessment return to the original figures will be reviewed by HMRC, as it may constitute a deliberate act and may result in a penalty”.

On 7 November 2022, HMRC (Officer Bennett) opened enquiries into the appellant’s tax returns for the years 2019/2020-2021/2022. It was JC’s evidence that this was because Officer Bennett had been unable to verify the expenditure claimed by the appellant and that his employer had confirmed that there was no requirement to claim any expenditure as a bus driver.

In a letter to HMRC dated 20 December 2022, the appellant explained that he had amended his tax returns and: “Beginning of the year 2020, effects of the pandemic profoundly affected, my line of work. Being in the public sector, I was classified as an essential worker. Personal protection equipment, sorting out accommodation to protect my family, specialised cleaning detergents, and frequent discarding of clothing, not to mention psychological therapy. All added enormous cost to job expenses”.

In his letter to HMRC of 1 March 2023, the appellant noted that the Covid 19 pandemic could cause profound disruption, some documents were not in a retrievable state due to rodent damage and decomposition, and “a health risk was a concern hence a discarding process followed and a thorough cleaning performed”. He went on to claim that the expenses were wholly exclusively and necessarily incurred in the performance of his duties and his belief that the steps that he had taken to protect himself in the workplace saved his life given the emergency.

It was JC’s evidence that Officer Bennett had seen that the appellant also claimed high expenditure for tax years 2016/2017-2018/2019 for which the appellant had not been able to provide evidence of any expenditure. It was his further evidence that Officer Bennett made his discovery on 9 March 2023 on the basis of the misgivings which he had about the veracity of the expenditure in light of Arriva’s email of 24 August 2022.

Officer Bennett issued the discovery assessments on 10 March 2023. In his covering letter he explained that they were issued in order to protect the interests of HMRC notwithstanding that he was not yet satisfied that the tax years under enquiry were complete and correct. The reasons given for the discovery assessments was that the appellant had claimed expenses for business travel and subsistence expenses and capital allowances, and fixed deductions for the years covered by those assessments, which Officer Bennett considered had either not been incurred or were not allowable.

The discovery assessments essentially rejected all expenditure save for £60 per year for the washing of uniform.

In response to the assessments, in a letter dated 20 March 2023, the appellant stated that the expenses claimed for the years 2016/2017-2018/2019 were incurred because of the road accident in which he was involved in November 2016, and due to the injuries inflicted as a result of an accident, “it was essential to purchase body harnessing products, customising back support seat cover, compression socks, to enable comfort, in order to carry on with work duties”. He once again confirmed that rodent infestation in his loft had unfortunately damaged necessary documents and was the reason why he had signed a mandate enabling Arriva to provide HMRC with his payslips.

In a letter dated 5 June 2023 from Arriva to HMRC, Arriva confirmed that as a bus driver, there was no requirement for the appellant to claim expenses. Masks had been supplied to drivers during the pandemic which were available at depots along with hand sanitiser. The appellant performed no role other than as a bus driver and there was therefore no need for him to incur any other expenses. The letter confirmed that no expenses had been claimed or paid to him in the preceding six years.

Following further correspondence in which the parties’ positions were rehearsed on a number of occasions, HMRC sent a penalty explanation letter dated 6 February 2024 to the appellant. This explained that HMRC were proposing to impose a penalty of £10,928.83 for submitting inaccurate returns for the tax years in question. The inaccuracies were described as: The claiming of PAYE expenditure despite having a job that did not incur expenses as confirmed by his employer; the appellant had confirmed that the expenses were a loan taken out to cover costs during the pandemic, but as he was clearly claiming expenses both before and after the pandemic and had no evidence to support his claims notwithstanding repeated requests for a breakdown of expenses, HMRC intended to impose a penalty based on deliberate behaviour.

In their view the behaviour was deliberate because having been told that HMRC believed the expenses were invalid, the appellant had never provided any explanation or breakdown of the figures nor supplied any supporting evidence. His job did not require him to incur expenses and he had deliberately obtained a tax advantage by claiming expenditure which he did not incur and to which he was not entitled. This was not careless, it was deliberate. Credit was given for the quality of disclosure in a total amount of 30% resulting in a penalty percentage of 59.5%.

In a letter dated 28 February 2024, the appellant provided a breakdown of his expenditure.

For the tax year 2017/2018, he had incurred £6,000 on lumbar support and £3,300 on back pain lumbar traction device.

For the tax year 2018/2019, he had incurred £4,500 on Joint Relief and £4,000 on N95 masks.

For the tax year 2019/2020, he had incurred £4,500 on N95 masks, £4,000 on protective clothing and £4,000 on Anti-Viral gels.

For the tax year 2020/21, he had incurred £5,000 on N95 masks, £5,500 on protection clothing, and £4,000 on Anti-Viral products.

For the tax year 2021/2022, he had incurred £5,600 on N95 masks, £5,700 on protection clothing, and £5,100 on Anti-Viral products.

On 5 March 2024, HMRC issued closure notices to the appellant for the tax years 2019/2020-2021/2022, for a total amount of £11,964.

On 27 May 2024, the appellant submitted his appeal to the tribunal and subsequently confirmed that his appeal was against the discovery assessments, the closure notices, and the penalty.

We were provided with copies of two loan agreements which the appellant claimed provided a source of funds to enable him to purchase the items for which he had claimed expenses. The first of these is for a loan of £8,000. It is not dated but the first repayment date was 16 May 2021, and the appellant confirmed in his oral evidence that it was entered into on or around that time.

The second loan agreement is dated 13 December 2021 and is in the sum of £10,000.

JC was not the assessing officer which was Officer Bennett. However, as Officer Bennett was not available to give evidence, JC had reviewed Officer Bennett’s files in order to enable him to provide evidence to the tribunal.

In addition to the evidence recorded above, JC explained that he would have come to the same conclusion as the assessing officer; Officer Bennett had determined that the appellant had acted deliberately as he had provided no evidence to support his expense claims nor had he provided a reasonable explanation of them in light of the fact that his employer had confirmed that expenditure would not have been appropriate; in his view the discovery assessments and penalty had been correctly issued.

He also confirmed to the Judge in response to a question to this effect, that careless and deliberate behaviour had not been considered at the time of the discovery assessment but was only considered later during the enquiry at or around the time at which the penalty was being considered and the penalty explanation letter sent to the appellant.

The appellant gave the following oral evidence.

The loans had been paid into his bank account. This money was used to pay for the equipment which he purchased and for which he claimed deductible expenses. He did not have complete bank account records because some of these had been eaten by rodents. He had however been able to download other bank statements. These did not cover the entirety of the tax years in question.

He paid for the equipment in cash and electronic transfers. The receipts for the purchases are not available as they had been eaten by rodents. Without these he was unable to demonstrate the expenditure incurred. He was unable to obtain replacement receipts from the suppliers because he had paid in cash.

The equipment provided by Arriva was inadequate, and to safeguard himself and his family he had to purchase better kit. He and other drivers had complained about this, but it made no difference to the quality of equipment with which they had been supplied.

He had asked Arriva to supply him with clothes and equipment to enable him to carry out his bus driving following his accident in November 2016, but they had said they were not prepared to provide any as he was on sick leave.

Even though the accident had taken place in 2016, he had to replace the equipment needed to enable him to perform his job on an ongoing basis.

He was aware of the Covid pandemic well before December 2019/January 2020 and had incurred expenditure on protective equipment before then.

His behaviour had not been deliberate. It was because as a result of the accident and the Covid pandemic, both of which were beyond his control.

He had received a letter dated 16 September 2022 from Officer Peel in which that officer had corrected his return for the tax year 2021/2022 and showed underpaid tax of £2,550.20. He considered that this was the extent of his liability.

He does not have the money to pay the tax or the penalty. He is paying off some of the outstanding money as and when he can afford it.