The first tier tribunal has allowed an appeal in part against adjustments HMRC made to a London accountant’s income tax and NI position.
In a recent tribunal [Olayinka Ayeni v HMRC (TC05329)] chartered certified accountant Olayinka Ayeni of New Cross accounting firm OA George & Co appealed the adjustments in respect of both his accountancy business and property letting business, plus also against late payment penalties and surcharges.
On giving evidence at the hearing, the tribunal found Ayeni to be an honest witness, but commented: “evidence was often quite vague and this was not helped by the fact that in many cases there was an insufficiency of documentary evidence to support his oral evidence.”
In a table summarising the particular matters that were in dispute – including deductibility of life assurance premiums, expenses and loan interest, among others – the Revenue repeatedly found that there was “insufficient evidence”.
In his concluding remarks tribunal judge Jonathan Richards said Ayeni was entitled to a deduction against profits of his property business in relation to certain property expenses. He added that he was also entitled to deduction against profits of his accounting firm for a proportion of life assurance premiums of £4,603 in the tax year 2006-07 and £3,218 in the tax year 2007-08.
However he said no adjustments needed to be made to Ayeni’s taxable profits for 2007-08 in respect of his argument that his entitlement to a deduction for loan interest had been understated.
Ayeni and HMRC officer Gill Cawardine did not reach an agreement on the deductibility of £14,857 of expenses, but the tribunal concluded that Ayeni was entitled to a deduction against profits of his property business only for rates of £808 incurred in 2007-08.
Ayeni received additional taxable income of £6,259 (not £12,519) in his property business in 2008-09 and he will be able to set expenses of £5,290 against that income.
The judge added that Ayeni had no entitlement to flat conversion allowances in 2007-08 or 2008-09, and that the late payment penalties and late payment surcharges were due, but that they need to be recalculated as a result of the overall decision.
His liability to income tax and NICs will also have to be recalculated.
“However, except insofar as necessary to give effect to those adjustments, the appeal is dismissed,” judge Richards concluded.
Do you think the judge came to the right conclusion? Have you ever had to represent a client or yourself in a similar case?