TC09619 - [2025] UKFTT 01020 (TC)

Notwithstanding that the appellant’s position is relevant to the closure notices, we now think it is appropriate to deal with his case that he has been overcharged. Having established the validity of the discovery assessments it is now up to the appellant to establish, on the balance of probabilities, that they overcharge him.

Unfortunately for the appellant, he has not managed to do this to our satisfaction.

We say this for a number of reasons.

Firstly, he has provided no documentary evidence of the expenditure. It may very well be, as he has submitted, that the relevant receipts which he needs to justify the expenditure are unavailable because they were eaten by rodents. But the reason he is not able to provide the relevant evidence is largely irrelevant when it comes to the amount of tax due.

We were taken through some of his bank statements in an attempt by the appellant to suggest that some of the outgoings were for the items for which he has claimed allowable expenses. We are afraid that there was no correlation between the outgoings on the one hand and the items on which those outgoings were alleged to have been incurred, on the other. There was certainly no identification of those outgoings with the items of expenditure set out in his letter of 28 February 2024.

The appellant claims that the loans are evidence of qualifying expenditure. We disagree. The loans are simply money which was paid to the appellant. They cast no light on the nature of the expenditure which the appellant asserts. They could have been used for something completely different. There is no documentary correlation between the loans on the one hand and the use to which those loans were put, on the other.

Secondly, we are of the view that we cannot rely on the appellant’s oral or written evidence.

It seems to us that the appellant is just as uncertain of the purported expenditure as we are. In his letter of 28February 2024, he identifies what are effectively round sum amounts for a number of items of expenditure. For example, in 2020/2021; £5,000 for N 95 masks, £5,500 for protective clothing, and £4,000 for anti-viral products. By the time he wrote this letter his documents had been purportedly eaten by rodents. We do not understand, therefore, where he obtained these figures from. In any event, we think it is inherently unlikely that any amounts that he spent not only in this year (as evidenced by the foregoing figures) but in other years, were similar round sum amounts.

If he did indeed spend money on those items, then it is highly likely that the amounts would be more precise and specific than those set out in the letter.

Finally, the amounts claimed in his original returns, then as subsequently amended, and then as set out in the letter of 28 February 2024, are inconsistent with each other. This is clear from a comparison of the figures set out in that letter with those set out in Appendix 2.

Take 2021/2022 as an example. In the letter of 28 February 2024, the appellant claims that he spent £16,400 on allowable expenditure. In his tax return for that year, he claimed expenses of £13,410. When he amended that return on 24 July 2022, he claimed expenses of £15,910. When he subsequently amended it on 16 September 2022, he claimed expenses of £18,060.

The fluidity of these numbers suggests to us that the appellant was grasping at straws. He had no records of the amount spent, and if he did indeed spend money on the items alleged, he is not in a position to provide any evidence as to the amount so spent.

And so he has not been able to satisfy the burden of establishing that, on balance, he did spend these amounts on the items so claimed.

Furthermore, in light of the claims for PPE, for years which clearly pre-date the onset of the Covid pandemic in the UK, we have serious reservations as to the veracity of his testimony regarding expenditure on those items. In 2018/2019 (i.e. before April 5, 2019) the appellant has claimed that he spent £4,000 on N95 masks. This is inconceivable. At that stage the UK was wholly ignorant of the existence, let alone of the threat, of the Covid virus. The appellant’s suggestion that he had known of it and had taken steps to protect himself against it, is risible.

We wholly reject this explanation as evidence that he incurred expenditure in the amounts claimed on that equipment. This causes us to treat, with considerable suspicion, the evidence (including his oral evidence, the amounts set out in his correspondence and the amounts reflected in the amendments he made to his returns) he has given regarding the nature and amounts of the alleged expenditure.

Accordingly, we have concluded that the appellant did not spend the amounts so claimed on expenditure which qualified for a tax deduction under section 336 ITEPA for any of the tax years in question.