A recent case has again highlighted the recurring issue with taxation; the Devil is in the Detail.
In the recent case of Phair, the taxpayer appealed to the First Tier Tribunal to argue (broadly) that a complex Capital Accumulation Plan (CAP) should not be liable to UK income tax because at the time he received distributions under the plan he was not resident in the UK. The issues and arguments were complex, but the taxpayer lost because (to simplify) the units awarded to him under the CAP were UK source income to be treated as ‘employment related securities.’ As he was resident when the units were awarded, then they remained within the scope of UK tax.
So far so bad for the taxpayer! What made it worse was that his tax agent failed to take into account all the issues related to the Appeal process. Hence, when sent an official Notice of Appeal pack they did not make a formal application to ‘opt out’ of the legal costs regime associated with the hearing.
Thus, whilst the Tribunal expressed sympathy for the fact Mr Phair was ‘horrified of his potential liability for HMRC’s costs,’ nevertheless HMRC were fully entitled to claim them.
The case shows, once again the importance of addressing technical detail, especially as current HMRC attitudes appear to be relatively unsympathetic, or to use the jargon ‘to have a reasonable excuse’ requires Death, Disease or Disaster.
