Presumption of continuity and under-declared income

In March 2017 HMRC opened an enquiry into the taxpayer’s 2015-16 self-assessment return prompted by the fact it included round numbers and very high expenses. It revealed that he did not issue invoices to his customers and had very little in the way of business records. Indeed he did not declare all his cash receipts and used some to pay for household expenses. Further his claim that he worked alone was untrue given that HMRC had evidence that showed a team of people worked for him.

Finally analysis of his bank account showed regular transactions with an account belonging to his mother. HMRC however concluded the mother did not use the account – for example there was no sign of her pension – and that it was a 'ghost’ account which he operated for his business.

HMRC issued discovery notices for the years...