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P Cannon v HMRC

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In P Cannon v HMRC [2017] UKFTT 859 (21 December 2017), a tax barrister was found not to have been careless in placing reliance on his accountant for the preparation of his tax return (except in relation to one specific error).

HMRC had imposed penalties on Mr Cannon under FA 2007 Sch 24 on the grounds that he had omitted certain professional fees from his gross income, he had made an incorrect furnished holiday letting loss claim and he had made a duplicated claim for repair work at his professional premises.

Mr Cannon was a barrister specialising in SDLT, who delivered tax planning advice. At the conclusion of a meeting with HMRC at his premises, a senior HMRC officer had invited him to desist from giving legal advice to clients in respect of any SDLT mitigation strategies or arrangements. Mr Cannon had declined the invitation and he believed that the enquiry into his affairs would probably not have taken place had he accepted it. The FTT made no finding as to whether the officer had intended what he had said to amount to a demand carrying an implication of adverse consequences for Mr Cannon should the demand not be met, ‘because it would be unfair of us to make any such finding without (the officer) having the opportunity to deal with that allegation’.

In relation to the first two grounds for the penalties, the FTT noted that there was no suggestion of any lack of reasonable care by Mr Cannon in his choice of a professional adviser; and the tribunal saw ‘no reason why a barrister, even one versed in some niche areas of tax law, should not place reliance upon his accountant if he holds himself out as able and willing to give expert advice’ on the relevant matters. Mr Cannon had not made careless errors and the errors should be characterised as ‘innocent mistakes.’

However, the FTT did find that Mr Cannon had been careless in relation to the duplicated claim. The tribunal found that because of the way the refurbishing expenses had been included in Mr Cannon’s accounts, there had been a risk of duplication, which he should have pointed out to his accountant. The penalty was therefore maintained in this respect.

Read the decision.

Why it matters: HMRC contended that the proposition that taxpayers cannot be expected to know all the intricacies of a very complex tax system should be watered down in relation to a barrister holding himself out as a tax expert. The FTT found, however, that Mr Cannon’s own abilities simply meant that he was in a better position to assess his accountant’s degree of proficiency and expertise. It also pointed out that: ‘It is simply a matter of reality that even senior personnel working within [HMRC] readily accept and assert that they usually only have expertise in a particular area of taxation law in which he/she is immersed as part of his/her employment.’

Issue: 1382
Categories: Cases