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Taxpayer was not a partner in a partnership

Male cook decorating dish

4 minute read.

The taxpayer was not liable to penalties for the late filing of partnership tax returns, as he was found on the facts not to have been a partner in a partnership.

The appellant was a cook. In 2011/12, he had been working in his girlfriend’s shop as a chef, until the relationship ended. He had been paid weekly, getting a wage slip from which tax was deducted. When he left that employment, one of the customers (P) asked the appellant to join a new café that he was starting and cook there.

The arrangement between the appellant and P was informal; he did not believe that he was in a partnership with P. The appellant had put no money into the new café, had not seen any accounts for the business, and had not signed any agreement. P looked after the paperwork for the new business, and the appellant worked in the kitchen. The appellant was not paid consistently by P, but ‘as and when’.

The appellant signed the tenancy agreement for the premises, but the rent was to be paid by P. The appellant did not know why he was asked to sign the tenancy agreement but agreed to do so because he thought it would help. He later found out that P had not paid the rent; the landlord closed down the cafe and the appellant was being pursued by the landlord for the unpaid rent.

HM Revenue and Customs (HMRC) issued the appellant with self-assessment returns for the tax years 2011/12, 2012/13, and 2013/14, and partnership tax returns for the tax years 2012/13 and 2013/14. The appellant was late in filing the returns, and HMRC imposed late filing penalties. The appellant appealed.

With regard to his self-assessment returns, the appellant’s ground of appeal was that he believed his accountant was dealing with them. However, the First-tier Tribunal (FTT) considered it well-established that reliance on a third party in those circumstances did not amount to a reasonable excuse for the late filing of the returns. The appellant’s appeal against the penalties in respect of the self-assessment returns was, therefore, dismissed.

However, with regard to the partnership returns, the FTT concluded that the appellant was not a partner in a partnership. Whilst signing the tenancy agreement was clearly a mistake and indicated a misplaced trust, the FTT did not consider that it made him a business partner; neither did the fact that he was registered with HMRC as a partner in a partnership. The appellant’s appeal in respect of the late partnership returns was, therefore, allowed.

Coke v Revenue and Customs [2018] UKFTT 602 (TC)

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