KLS Electrical Contracting

A couple traded in partnership. An HMRC enquiry into the business’s return for the year to 30 April 2004 found excessive travelling and subsistence claims.

Further investigation led the Revenue to believe expenses had been over-claimed in the years 2001/02 to 2007/08. The department amended the partnership profits for each year and imposed penalties at 35% of the outstanding tax under TMA 1970 s 95.

The firm appealed saying the adjustments were guesses on the part of HMRC and the penalties were excessive. The partners claimed they had both suffered life-threatening illnesses that they had cooperated with the taxman’s enquiry and had relied on their accountant.

The First-tier Tribunal said it was clear the partners had not taken sufficient care in preparing accounts and returns. It was for the taxpayer business to show that the Revenue’s figures were incorrect but no evidence was produced. The...