Disorganised approach

Under-declaration of trading income

The taxpayer was an events organiser. After an enquiry into her 2010/11 tax return HMRC concluded that the taxpayer had understated her income because of unidentified deposits in her bank account.

It issued an assessment and imposed a penalty on the basis that the under-declaration had been deliberate. The taxpayer appealed.

The First-tier Tribunal noted that the taxpayer – nor her husband – could provide documentary evidence to identify the income. However the judge did accept that a couple of entries were the result of an insurance claim and a wedding present and he ruled that the assessment should be reduced to take those into account.

On the penalty the tribunal decided that the under-declaration arose as a result of the taxpayer’s disorganised approach to her personal finances rather than a deliberate default. It said the penalty should therefore be reduced from 59.5%...