Mr Balvinder Malhi Mrs Jaswinder Kaur v Commissioners for Her Majesty's Revenue and Customs

Facts

The Appellants, Mr Balvinder Malhi and Mrs Jaswinder Kaur, were partners in the Bruntsfield nursing home. Following an HMRC enquiry into the partnership return for the year ending 31 March 2005 and the Appellants' personal returns, additional tax was agreed as due from each Appellant for the three tax years ending 5 April 2006, arising from understated partnership profits and, in Mrs Kaur's case, omitted personal taxed interest. The enquiry, opened on 14 November 2006, was protracted: section 19A of the Taxes Management Act 1970 information notices and penalty notices for non-compliance were issued to the Appellants' agent, meetings with the Appellants were repeatedly declined, and the papers were referred for a period to HMRC's civil investigation of fraud office, though no allegation of fraud was ultimately made. A completion notice and discovery amendments were issued in July 2008, appealed, and partly determined by the General Commissioners in October 2008; the balance was resolved following a meeting between Dr Malhi and the HMRC inspector, Mr Parmenter, in January 2009, and the Appellants' personal returns were amended in September 2009 to reflect the increased profit shares. HMRC then imposed penalties of 50% of the tax under section 95A(1)(a)(i) of the Taxes Management Act 1970, calculated from abatements of 5% for disclosure, 25% for co-operation and 20% for size and gravity. The Appellants appealed for the overall penalty to be reduced to 15%, without disputing that the returns had been negligently submitted.