The View from No 50





May 2014

K P Bonney & Co

Chartered Accountants and

Chartered Tax Advisers

50 Cleasby Road  Menston

Ilkley  LS29 6JA

Tel:  01943 870933

Fax:  01943 870925







When HMRC conducts an enquiry into your tax return it can ask to see any information or documents which are ‘reasonably required’ in order to check your tax position.


What is reasonably required?


Enquiring into the tax return of a doctor, HMRC issued a statutory notice demanding to see certain records including her appointments diary.  The doctor refused to hand it over.  She stated the diary was not a financial record so having sight of it would neither help nor hinder HMRC in its effort to establish whether her tax return was complete.  Further, she claimed, the diary contained confidential patient information and her duty of confidentiality to her patients over-rode any statutory duty to produce information to HMRC.


The tribunal agreed with the doctor on her first contention.  Production of the diary was not reasonably required in order to establish whether her tax return was correct.  Having found in her favour on that point the tribunal ducked the question of whether the tax statutory notice trumped the duty of patient confidentiality.


Our Advice:  This decision helps those who keep a diary which is an aide memoir type record.  We would nevertheless suggest that, patient / client confidentiality considerations aside, for those who run a structured appointments diary it can actually be helpful to produce it to HMRC.  Non-financial documents which support financial documents are highly persuasive. End of enquiry.





Here is the mother of all loopholes.


It concerns a 1776 painting of Omai, a young South Sea Islander, by Sir Joshua Reynolds.


The painting belonged to the executors of the estate of Lord Howard of Henderskelfe and was sold by them for £9.4m at auction in 2001.


Before its sale the painting was exhibited at Castle Howard in North Yorkshire.  Its display there boosted visitor numbers.  The house was owned and operated by a limited company, Castle Howard Estate Limited.


There were two quirks here.


The first concerned whether or not the painting was plant.


As the painting served the function of attracting visitors to the house and as its display there was to all intents and purposes permanent it satisfied the plant test.


That was good for the executors because a gain made on the disposal of plant is exempt from capital gains tax.  But there are a few exceptions to this rule.  One is that if you use the plant in a trade of yours the exemption does not apply.


Here was the second quirk.


99 times out of 100 the owner of the trade and the owner of the asset are the same person.  Accordingly the plant exemption does not apply and the gain is taxable.


But here the owner of the trade was Castle Howard Estate Limited and the owner of the painting was the executors of the estate of Lord Howard.


The Court of Appeal held that as the executors themselves were not carrying on a trade the exception to the exemption did not apply.


So the gain was exempt.


The relevant legislation has been in place for fifty years yet nobody previously argued this literal interpretation.


It is quite clear no great planning went into achieving this happy outcome.   It is also likely the decision will have limited effect in practice as in most cases the owner of the asset and the owner of the trade in which it is used are one and the same person.  Nevertheless the case has thrown up an interesting clarification of the law.


The judge said the exemption “may have proved inconvenient to HMRC but they must take the rough with the smooth and this case may be an example of the rough”.





We all remember the agonies suffered by Starbucks following the revelation that it paid a relative pittance in corporation tax in the UK.  The company even volunteered to pay tax in order to restore its reputation.


We might wish the government would brandish the legislative stick at Starbucks and their like but might the carrot approach produce a better result?


In an interesting development a not for profit organisation called Fair Tax Mark has come up with an accreditation scheme which could achieve such an outcome without the anguish. 


The scheme has parallels with the Fairtrade mark with which we are familiar.  The thinking is that companies which take financial transparency seriously will apply to be awarded the Fair Tax Mark. 


No doubt the companies awarded the FTM will make great play of that fact in the hope that customers will beat a path to their door.


In case you were wondering, the companies which apply and which don’t come up to scratch will not be named and shamed.


It will cost a minimum of £200 to obtain accreditation.


For more information see






We have practised tax for long enough to know that HMRC makes errors.  In fact it makes many errors.


So it is a little worrying that the government is proposing to give the error prone HMRC powers to dip into the bank accounts of taxpayers in order to collect unpaid tax without first receiving their informed consent.


We can understand the motivation behind this move.  HMRC wastes a lot of time chasing the can pay won’t pay brigade.  A power like this would enable them to collect unpaid taxes more efficiently. 


But the worry is it will mess up and take the money from the wrong account.  More fundamentally, we worry this measure tips the scales of justice just a little too far in favour of the state.


We hope our MP’s will pause and think hard before allowing this proposal to pass into law.





Fast forward to June.  It is just before the England v Uruguay match at the World Cup.  Luis Suarez goes into the Uruguayan changing room to find his teammates looking a bit glum.


“What’s up?” he asks.


“Well, we’re having trouble getting motivated for the game.  We know it’s important but it’s only England.  They’re rubbish and we really can’t be bothered”.


Luis looks at them and says, “Well, I reckon I can beat them by myself.  You lads go down to the bar.”   So Luis goes out to play England by himself and the rest of the team goes off for a few drinks.


After a while they wonder how the game is going so they get the barman to turn on the TV.   A big cheer goes up as the screen reads “Uruguay 1 – 0 England (Suarez ’12)”. He is beating England all by himself!  A few more drinks slip down and the game is forgotten until someone remembers “It must be full time now.  Let’s see how he got on.”  They put the TV back on. 


“England snatch a late draw - Uruguay 1 – 1 England”.  They can’t believe it.  He has single handedly got a draw against England!  They rush back to the stadium to congratulate him.  They find him in the dressing room, still in his kit, sitting with his head in his hands.  He refuses to look at them.


“I have let you down.  I have let you down.” 


“Don’t be daft.  You got a draw against England, all by yourself.  And they only scored at the very end!”


“No, no, I have let you down…  I got sent off after 48 minutes.”




Copyright:  K P Bonney & Co LLP 2014.  All rights reserved.  No part of this publication may be produced, stored in a retrieval system, or transmitted in any form or by any means, electronic mechanical, photocopying, recording or otherwise without prior written permission of the publishers.  Disclaimer:  The publishers have taken all due care in the preparation of this publication.  No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the authors or the publisher.


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