The Revenue service has won a £3.1m case against a taxpayer after a judged ruled HMRC could dispute calculations based on its own algorithms.
A programme used to work out tax that was based on HMRC’s own technical specifications could not be relied upon, the tribunal ruled, according to FTAdviser’s sister paper the FT.
The dispute involved a scheme that employed insurance policies to create a massive deduction that was used to reduce the taxpayer’s other tax liabilities.
HMRC accepted that it reduced his income tax bill, but rejected his argument that it also reduced his capital gains tax (CGT) bill.
Andrew Hubbard of RSM, a professional services firm, told the FT the ruling had implications for the tax authority’s ambitious plans to digitise the tax system.
He said that similar problems might occur again, since the “making tax digital” initiative would require businesses and landlords with turnover above £10,000 to rely on third party software, using specifications provided by HMRC.