Magic Carpets (Commercial) Ltd v HMRC

In Magic Carpets (Commercial) Ltd v HMRC [2023] UKFTT 700 (TC) (1 August 2023) the FTT held that the taxpayer’s use and implementation of an employee benefit trust (EBT) scheme was careless but that this carelessness did not bring about a loss of tax. Accordingly HMRC’s PAYE determinations were issued out of time and the taxpayer was not liable for penalties pursuant to FA 2007 Sch 24 para 3. 

It was common ground before the FTT that the EBT scheme used by the company did not give rise to the intended tax savings. It was also common ground that HMRC had issued its determinations for additional PAYE income tax outside the normal four-year window but within the six-year timeframe allowed where a loss of tax is brought about carelessly. The only questions before the FTT were (i) whether HMRC’s determinations were made in time because the taxpayer carelessly brought about the...