Vague receipt

Gift or payment for a service?

The taxpayer received a substantial cash payment from L when he sold a piece of land that the taxpayer had used for grazing horses. It was described as 50% of the profit on the sale of the land and he signed a document styled ‘invoice’ to acknowledge receipt. He asked various people including a solicitor whether the sum was taxable. He told them it was a gift and he had done no work for it. They advised him that on that basis it was not taxable. The taxpayer did not therefore declare it as a taxable receipt.

HMRC became aware of the payment and assessed it to tax on the ground that it was a share of the profit on the sale of the land. The officer also claimed that the taxpayer had received a further £11...