Lack of joined-up thinking on HMRC’s part

The taxpayer moved to the UK in 2007 and elected to be taxed on the remittance basis as a non-domicile. HMRC considered that his lifestyle was inconsistent with the income and gains shown on his tax return and suspected tax fraud. In 2017 HMRC invited the taxpayer to make use of the contractual disclosure facility under code of practice 9. The taxpayer’s adviser wrote to HMRC asking for an explanation of why it suspected fraud and explaining that the taxpayer’s lifestyle was supported by regular substantial gifts from his father.

HMRC was not satisfied and issued an information notice. The taxpayer appealed.

The First-tier Tribunal said when HMRC began enquiring into the taxpayer’s affairs it had a legitimate suspicion of undeclared income because of the discrepancy between his lifestyle and the level of income reported in his UK tax returns. However after various documents and explanations were...