UT-2023-000051 - [2024] UKUT 00114 (TCC)

The FTT had set out the principles in Beneficial House but nowhere in the Decision did it explain how it had come to its decision based on those principles. Instead, the FTT expressed the view that HMRC’s outstanding questions amounted to a “fishing expedition”, presumably on the basis of its findings at [56]. In making those findings, it failed to acknowledge that the reason there was no evidence of the funds being transferred to or for the benefit of any of the Respondents, or of the receipt of any undisclosed benefit from them was that the Respondents had refused to provide that information.

There was therefore, according to HMRC, a gap in the FTT’s reasoning on this point. If taken to its logical conclusion, it suggests that HMRC are not entitled to ask for information or conduct enquiries where they have no evidence of undisclosed income or gains. However, that is precisely the reason why enquiries into taxpayers’ returns are opened and conducted, i.e. to check whether the return and self-assessment included therein is correct and complete.