Following an enquiry into the taxpayer’s self-assessment return for 2005/06, HM Revenue & Customs (HMRC) concluded that his income from self-employment had been under-declared. HMRC then applied the alleged under-declaration to the two years before and two years after 2005/06, relying on the ‘presumption of continuity’ principle established in Jonas v Bamford (1973 51 TC 1). The taxpayer appealed.
HMRC's adjustments for 2005/06 were calculated on the basis that some expenditure items were not allowable, other expenditure adjustments could not be agreed, and also based on a cash control analysis produced by HMRC, which compared sales and other income against bank deposits and cash expenditure. The taxpayer’s accountants accepted that the accounts contained some errors, but submitted that they were not the sort of errors that could be repeated over a number of years.
The First-tier Tribunal (FTT)
