Practice and Procedure


PUBLISHED April 23, 2003

The Special Commissioners had been entitled to come to the conclusion that the appellant's evidence had not been reliable and that he had put forward his tax return in 1991 dishonestly, knowing that his company had been a principal and not a nominee.Appeal by the appellant ('R') from the dismissal by Special Commissioners ('the commissioners') of his appeal against assessments to income tax that were issued on 4 September 2000 to reverse the effect of his having secured interest relief for the tax years 1988/9 through to 1992/3 inclusive. R was a chartered accountant who established a company ('the company') whose object was to act as nominee or trustee. The company borrowed money from Midland Bank and Dunbar to finance a property transaction. In April 1989, R submitted tax returns in respect of income for the year to 5 April 1989. He made no claim for relief in the return in respect of any of the interest on the loans which had accrued and had been paid up to 5 April 1989. On 22 August 1991, he submitted his returns for the years to April 1990 and 1991, claiming relief for "interest on other loans" in respect of the interest paid on the Dunbar and Midland loans for three years: to April 1989, 1990 and 1991. In March 1992, the Revenue allowed the claim for interest relief. R's claim was based on the proposition that he bore the interest, because the company had been acting as his nominee. The Revenue raised its assessments to disallow the interest relief on the basis that this had not been true, and that either he had known that it was not true, or he ought to have known it not to be true. The commissioners held that the Revenue had discharged the burden of proving that R had made the claims for interest relief in his personal tax return when he knew he was not entitled to do so. That was fraudulent conduct as it involved dishonesty. R appealed, submitting that the findings of fact made could not have been justified by the evidence before the commissioners (Edwards v Bairstow (1956) AC 14).HELD: (1) The conclusion to which the commissioners had come was one which had been well open to them. (2) The evidence supported the conclusion that the company had not acted as nominee, but had been trading. (3) On the evidence, the Revenue had discharged the burden of proving that R had made claims for interest relief in his personal tax return when he had known that he had not been entitled to do so. (4) It had been fraudulent conduct as it had involved dishonesty and R had known what he was doing.Appeal dismissed.

[2003] EWHC (Ch) 781