HMRC had raised assessments in relation to the tax years 2002/03 – 2006/07, alleging that Miss Ali had underdeclared income. This arose as a result of deposits made into her bank accounts for the years in question which HMRC asserted were income.
The appelent explained that the reason for the transactions was that money had been lent to members of her family who had then returned the funds to her.
The tribunal found that the burden of proof was on Miss Ali to show that the payments did not amount to income. They found that she was a truthful and careful witness, and in particular noted that it was normal in the community of which Miss Ali is part for there to be communal use of bank accounts by family members, even to extended family.
The tribunal therefore allowed Miss Ali’s appeal as on the balance of probabilities they were satisfied that the deposits did not represent taxable income.