Negligent return

The taxpayer joined the employer company GHG in January 1988. He acquired 250 T shares in the business for £6 725 in 2001.

He sold his shares to GHG in May 2006 and received a payment of £382 748. The company deducted tax and National Insurance (NI).

The taxpayer filed his self-assessment tax return for 2006/07 in November 2007 declaring the £382 748 which he said was a capital gain in respect of disposal of shares. He claimed a repayment of the PAYE tax and NI paid by the employer.

HMRC rejected the claim. They said the taxpayer had been negligent in making his return and imposed a penalty of £23 650 under TMA 1970 s 95. The taxpayer appealed.

The First-tier Tribunal said the shares had been acquired by the taxpayer by dint of his employment and his interest was conditional: under the agreement made between...