Rowland v HMRC

Sp C [2006] SSCD 536 (Sp C 548)

The taxpayer realised a very large capital gain in 1999/2000, with the result that a large tax payment would become due on 31 January 2001. Her accountants advised her that she would have a large partnership loss to set against the gain, and only needed to make a relatively small balancing payment. She paid the amount recommended by her accountants. However, the HMRC did not agree the loss claim submitted by the taxpayer’s accountants, and imposed a surcharge on the taxpayer under Taxes Management Act 1070, s59C. The taxpayer appealed, contending that she had a reasonable excuse within s 59C(9).

The Special Commissioner accepted her contention and allowed her appeal, holding that 'it was reasonable for (the taxpayer) to rely on her then accountants and it was this reliance that led to the underpayment'. He observed that the corresponding VAT legislation specifically provided that where:

'reliance is placed on any other person to perform any task, neither the fact of that reliance nor any dilatoriness or inaccuracy on the part of the person relied on is a reasonable excuse'.

However, there was 'no equivalent provision that reliance on a third party is not a reasonable excuse for direct tax purposes' and, therefore, the taxpayer’s appeal was allowed.