Tribunal – allowable expense deductions
The Tribunal dismissed an appeal by a taxpayer who worked as a freelance musician against adjustments to his self-assessment returns following an HMRC enquiry.
The case stemmed from a formal enquiry into the musician’s self-assessment return for the 2003-4 tax year which took place in early2006. HMRC made a number of adjustments to the return mainly in relation to employment income where the errors related to incorrect reporting of the figures on the return. The Tribunal gave one example whereby a PAYE refund of £114 was incorrectly reported as PAYE deducted at source of £1,114. The taxpayer in this case ultimately agreed that the adjustments put forward by HMRC were correct in relation to employment income and some other miscellaneous expenses.
HMRC also disallowed a significant amount of expenses which had been claimed in relation to the taxpayer’s work as a freelance musician. A closure notice was issued pursuant to Section 9A, TMA 1970 in respect of the 2003-4 tax year. HMRC also issued discovery assessments in respect of the tax years 2001-2, 2003-3, 2004-5 and 2005-6 pursuant to Section 28A, TMA 1970.
The taxpayer appealed against all the assessments, the contentious issue being the disallowance of certain expenses. The Tribunal agreed with HMRC that the majority of expenses claimed were not business related. The taxpayer was also unaware of the rules limiting the deduction of household expenditure as a business expense and thought it unfair that his start-up costs were not deductible.
The Tribunal considered that HMRC’s proposal for allowable expenses deductions was more than reasonable and the taxpayer’s appeals were dismissed.