Supreme Court in Tooth set a binding precedent

The taxpayer and his wife ran a partnership that was initially a forensic accounting business but in 1990 traded as a property developer.

In 2006 expecting to receive funds in settlement of a litigation in which the partnership had become involved the couple planned to buy a property. However the settlement did not take place so their son and daughter-in-law bought the property. They sold it in 2007 making a profit. It was agreed that £200 000 from the sale proceeds would be paid to the partnership as a finders fee.

The taxpayer did not include the fee in the partnership return on the basis that there were partnership losses and expenses that could be offset against it. He did not notify his chargeability to tax or file a self assessment return that year.

During a fraud investigation into the couple’s son the taxpayer told HMRC...