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The taxpayer was the controlling director of a company which ran a restaurant. HMRC considered that he under-declared his remuneration, benefits and rental income in his tax returns for the years 1993-94 to 1998-99. They therefore sent him estimated assessments.
After a High Court challenge to those assessments, HMRC served a notice claiming penalties under TMA 1970, s 95(1)(a) for negligently submitting incorrect returns.
The taxpayer appealed to the General Commissioners. Applying the criminal standard of proof of beyond reasonable doubt, they found that the taxpayer had not been shown to have negligently understated income. HMRC appealed by way of case stated.
In the High Court, the judge said that the proceedings in this case were civil, which gave a civil standard of proof. The General Commissioners had erred in applying the criminal standard of proof and the case was remitted to them for further consideration.
HMRC's appeal was allowed.
