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L Smith v HMRC

Business tax: Accounts: work in progress

In L Smith v HMRC (TC00403 – 26 March) HMRC enquired into the accounts submitted by a building contractor (S). HMRC formed the opinion that the accounts seriously understated the value of his work in progress and issued 'discovery' assessments covering the years 1994/95 to 2001/02. S appealed. The First-Tier Tribunal was 'not impressed' by the evidence given by S's accountant who had stated that he had 'in general not included work in progress in the accounts'. The tribunal noted that this ignored the requirements of SSAP9 and FRS5 and held that this was 'negligent conduct' within TMA 1970 s 29(4). The tribunal reviewed the evidence in detail and allowed the appeals in part reducing the assessments for 1997/98 to 2001/02 and discharging the assessments for 1994/95 to 1996/97.

Why it matters: The principles of accountancy require that the...

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