Carelessness by third party caused insufficiency in return

The taxpayer appealed against a discovery assessment raised by HMRC for the 2009-10 tax year. It related to his participation in a tax avoidance scheme during 2008-09. He wished to set off losses claimed to have been generated by the scheme against income from his existing trade in 2008-09 and carry forward the balance to use against his 2009-10 trading income. He accepted HMRC’s conclusion that the scheme did not work so the losses were not allowable and there was therefore an insufficiency in his 2009-10 tax return. The issue was rather whether the insufficiency in the tax return was brought about carelessly by the taxpayer or a third party (B) acting on his behalf so that HMRC’s assessment was in time.

The First-tier Tribunal found that B was acting as tax adviser to the taxpayer. As such it was necessary to judge him by the standard of...