The First Tier Tribunal has decided that the tax payer should have taken professional advice on tax implications resulting from a declaration of trust for the benefit of his sister. The tax payer did not disclose the sale of a property for £1.8m. HMRC raised discovery assessments outside the usual time limits. HMRC also issued penalties for deliberate and fraudulent behaviour. The First Tier accepted that there was no evidence to support the declaration of trust actually existed. The judges also concluded that the tax payer should have known that there would be tax implications of entering into such declaration of trust and therefore was liable for higher penalties under the deliberate behaviour.

Our analysis: This is an unusual decision as the judges have decided that failure to take professional advice amounted to deliberate/ fraudulent behaviour.