Mr J R Hanson v The Commissioners of HMRC

FTT 314

In the recent First Tier Tribunal case of Mr J R Hanson v The Commissioners of HMRC FTT 314, the tribunal held that it is not "careless" on the part of the taxpayer not to verify professional advice given by his accountant.

The taxpayer had submitted his tax return, which had been prepared by his accountants, claiming relief from capital gains tax on the sale of loan notes that Mr Hanson had received as part of the consideration for selling his business.

HMRC launched an enquiry into Hanson's tax return and found that he was not entitled to the relief claimed and issued a penalty for "carelessness" of £14,000 in addition to the CGT found to be due.

Mr Hanson appealed against the penalty contending that ‘reasonable care’ could not entail checking that his accountants had given him sound professional advice. HMRC defended its position on the basis that an error by an advisor was still the responsibility of the taxpayer. HMRC argued that it is the taxpayer's responsibility to ensure that advice provided by his advisors was indeed correct. 

HELD:  The tribunal judge, took the opposite view that the taxpayer had taken reasonable care by utilising the services of a professional adviser even though it subsequently became clear that the accountant had been careless in his advice.

The judge concluded that clients must ensure they make sure what they are signing is correct within their own ability and competence but that ‘An ordinary person cannot be expected to challenge specialist professional advice on a complex legal point. But they ought to be able to recognise the complete absence of a major transaction’.


There is currently no provision within tax legislation to charge an adviser a penalty for carelessness or negligence on the part of a professional adviser. The only similar provision covers ‘knowingly incorrect’ returns. 

HMRC will consider this state of affairs to be highly unsatisfactory and it remains to be seen whether a change in the legislation will be forthcoming.

This case reinforces the decision in Rowland v HMRC Sp C [2006] SSCD 536 (Sp C 548).

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