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Delay reduces penalty

06 September 2013
Issue: 4419 / Categories: Tax cases , Admin , Investigations

Khawaja v CRC, Upper Tribunal (Tax and Chancery Chamber)

An HMRC investigation in 1998 found that a restaurant had under-declared its takings and its director the taxpayer had not disclosed other income.

The Revenue imposed penalties of £41 332 on the taxpayer under TMA 1970 s 95 and the taxpayer appealed to the General Commissioners who upheld the fines in principle but reduced them to £6 000 on the basis the tax department should have applied the criminal standard of proof beyond reasonable doubt.

HMRC had not proved beyond reasonable doubt that the takings had been understated but they had done so with respect to the other income.

The case took two years to move to the High Court which allowed the taxman’s appeal holding that the normal civil standard of the balance of probabilities rather than the criminal standard of proof beyond reasonable doubt applied for penalties under...

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